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, 2010
	OR
[  ]	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	Registrant; State of Incorporation; Address; and Telephone Number	I.R.S. Employer Identification No.
1-5324	NORTHEAST UTILITIES (a Massachusetts voluntary association) One Federal Street Building 111-4 Springfield, Massachusetts 01105 Telephone:  (413) 785-5871	04-2147929
0-00404	THE CONNECTICUT LIGHT AND POWER COMPANY (a Connecticut corporation) 107 Selden Street Berlin, Connecticut 06037-1616 Telephone:  (860) 665-5000	06-0303850
1-6392	PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE (a New Hampshire corporation) Energy Park 780 North Commercial Street Manchester, New Hampshire 03101-1134 Telephone:  (603) 669-4000	02-0181050
0-7624	WESTERN MASSACHUSETTS ELECTRIC COMPANY (a Massachusetts corporation) One Federal Street Building 111-4 Springfield, Massachusetts 01105 Telephone:  (413) 785-5871	04-1961130

______________________________________________________________________________

Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days:

Yes	No
ü

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  

Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.  (check one):

	Large Accelerated Filer	Accelerated Filer	Non-accelerated Filer
Northeast Utilities	ü
The Connecticut Light and Power Company			ü
Public Service Company of New Hampshire			ü
Western Massachusetts Electric Company			ü

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act):

	Yes	No
Northeast Utilities		ü
The Connecticut Light and Power Company		ü
Public Service Company of New Hampshire		ü
Western Massachusetts Electric Company		ü

Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date:

Company - Class of Stock	Outstanding as of April 30, 2010
Northeast Utilities Common shares, $5.00 par value	175,995,600 shares
The Connecticut Light and Power Company Common stock, $10.00 par value	6,035,205 shares
Public Service Company of New Hampshire Common stock, $1.00 par value	301 shares
Western Massachusetts Electric Company Common stock, $25.00 par value	434,653 shares

Northeast Utilities holds all of the 6,035,205 shares, 301 shares, and 434,653 shares of the outstanding common stock of The Connecticut Light and Power Company, Public Service Company of New Hampshire and Western Massachusetts Electric Company, respectively.  

Public Service Company of New Hampshire and Western Massachusetts Electric Company each meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q, and each is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) of Form 10-Q.

GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or acronyms that are found in this report.
CURRENT OR FORMER NU COMPANIES, SEGMENTS OR INVESTMENTS:
Boulos	E.S. Boulos Company
CL&P	The Connecticut Light and Power Company
HWP	HWP Company, formerly the Holyoke Water Power Company
NAESCO	North Atlantic Energy Service Corporation
NGS	Northeast Generation Services Company and subsidiaries
NPT	Northern Pass Transmission, LLC
NUTV	NU Transmission Ventures, Inc.
NU or the Company	Northeast Utilities and subsidiaries
NU Enterprises	NU Enterprises, Inc., the parent company of Select Energy, NGS, SECI and Boulos
NUSCO	Northeast Utilities Service Company
NU parent and other companies	NU parent and other companies is comprised of NU parent, NUSCO and other subsidiaries, including HWP, RRR (a real estate subsidiary), and the non-energy-related subsidiaries of Yankee (Yankee Energy Services Company, and Yankee Energy Financial Services Company)
PSNH	Public Service Company of New Hampshire
Regulated companies	NU's Regulated companies, comprised of the electric distribution and transmission segments of CL&P, PSNH and WMECO, the generation segment of PSNH, and Yankee Gas, a natural gas local distribution company
RRR	The Rocky River Realty Company
SECI	Select Energy Contracting, Inc.
Select Energy	Select Energy, Inc.
SESI	Select Energy Services, Inc., a former subsidiary of NU Enterprises
WMECO	Western Massachusetts Electric Company
Yankee	Yankee Energy System, Inc.
Yankee Gas	Yankee Gas Services Company
REGULATORS:
DOE	U.S. Department of Energy
DPU	Massachusetts Department of Public Utilities
DPUC	Connecticut Department of Public Utility Control
FERC	Federal Energy Regulatory Commission
NHPUC	New Hampshire Public Utilities Commission
SEC	Securities and Exchange Commission

OTHER:
2009 Form 10-K	The Northeast Utilities and subsidiaries combined 2009 Annual Report on Form 10-K as filed with the SEC
2010 Healthcare Act	Patient Protection and Affordable Care Act
AFUDC	Allowance For Funds Used During Construction
AMI	Advanced metering infrastructure
ARO	Asset Retirement Obligation
C&LM	Conservation and Load Management
CfD	Contract for Differences
CSC	Connecticut Siting Council
CTA	Competitive Transition Assessment
CWIP	Construction work in progress
EFSB	Energy Facilities Siting Board
EPS	Earnings Per Share
ES	Default Energy Service
ESOP	Employee Stock Ownership Plan
FASB	Financial Accounting Standards Board
Fitch	Fitch Ratings
FMCC	Federally Mandated Congestion Charge
FTR	Financial Transmission Rights
GAAP	Accounting principles generally accepted in the United States of America
GSC	Generation Service Charge

i

GSRP	Greater Springfield Reliability Project
GWh	Gigawatt Hours
HG&E	Holyoke Gas and Electric
HQ	Hydro-Québec, a corporation wholly-owned by the Québec government, including its divisions that produce, transmit and distribute electricity in Québec, Canada
HVDC	High voltage direct current
IPP	Independent Power Producers
ISO-NE	New England Independent System Operator or ISO New England, Inc.
KV	Kilovolt
KWh	Kilowatt-Hours
LBCB	Lehman Brothers Commercial Bank, Inc.
LNG	Liquefied natural gas
LOC	Letter of Credit
LRS	Last resort service
MA DEP	Massachusetts Department of Environmental Protection
MGP	Manufactured Gas Plant
MMBtu	One million British thermal units
Money Pool	Northeast Utilities Money Pool
Moody's	Moody's Investors Services, Inc.
MW	Megawatt
MWh	Megawatt-Hours
NEEWS	New England East-West Solutions
Northern Pass	A high voltage direct current transmission line project from Canada to New Hampshire
NU supplemental benefit trust	The NU Trust Under Supplemental Executive Retirement Plan
NYMEX	New York Mercantile Exchange
PBOP	Postretirement Benefits Other Than Pension
PBOP Plan	Postretirement Benefits Other Than Pension Plan that provides certain retiree health care benefits, primarily medical and dental, and life insurance benefits
PCRBs	Pollution Control Revenue Bonds
Pension Plan	Single uniform noncontributory defined benefit retirement plan
PGA	Purchased Gas Adjustment
PPA	Pension Protection Act
Regulatory ROE	The average cost of capital method for calculating the return on equity related to the distribution and generation business segments excluding the wholesale transmission segment
ROE	Return on Equity
RFP	Request for Proposal
RRB	Rate Reduction Bond
RSUs	Restricted share units
S&P	Standard & Poor's Financial Services LLC
SBC	Systems Benefits Charge
SCRC	Stranded Cost Recovery Charge
SERP	Supplemental Executive Retirement Plan
SS	Standard service
TCAM	Transmission Cost Adjustment Mechanism
TSA	Transmission Services Agreement
UI	The United Illuminating Company
VIE	Variable interest entity
Yankee Companies	Connecticut Yankee Atomic Power Company, Yankee Atomic Electric Company and Maine Yankee Atomic Power Company

ii

NORTHEAST UTILITIES AND SUBSIDIARIES
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
ITEM 1 – Unaudited Condensed Consolidated Financial Statements for the Following Companies:
Northeast Utilities and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited) - March 31, 2010 and December 31, 2009	2
Condensed Consolidated Statements of Income (Unaudited) - Three Months Ended March 31, 2010 and 2009	4
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended March 31, 2010 and 2009	5
The Connecticut Light and Power Company and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited) - March 31, 2010 and December 31, 2009	8
Condensed Consolidated Statements of Income (Unaudited) - Three Months Ended March 31, 2010 and 2009	10
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended March 31, 2010 and 2009	11
Public Service Company of New Hampshire and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited) - March 31, 2010 and December 31, 2009	14
Condensed Consolidated Statements of Income (Unaudited) - Three Months Ended March 31, 2010 and 2009	16
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended March 31, 2010 and 2009	17
Western Massachusetts Electric Company and Subsidiary
Condensed Consolidated Balance Sheets (Unaudited) - March 31, 2010 and December 31, 2009	20
Condensed Consolidated Statements of Income (Unaudited) - Three Months Ended March 31, 2010 and 2009	22
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended March 31, 2010 and 2009	23
Combined Notes to Condensed Consolidated Financial Statements (Unaudited - all companies)	24
Report of Independent Registered Public Accounting Firm	48

iii

	Page
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations for the following companies:
Northeast Utilities and Subsidiaries		49
The Connecticut Light and Power Company and Subsidiaries		64
Public Service Company of New Hampshire and Subsidiaries		66
Western Massachusetts Electric Company and Subsidiary		68
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk		70
ITEM 4 - Controls and Procedures		70
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings		71
ITEM 1A - Risk Factors		71
ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds		71
ITEM 6 - Exhibits		72
SIGNATURES		74

iv

NORTHEAST UTILITIES AND SUBSIDIARIES

1

NORTHEAST UTILITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
		March 31,		December 31,
(Thousands of Dollars)		2010		2009
ASSETS
Current Assets:
Cash and Cash Equivalents	$	30,012	$	26,952
Receivables, Net		570,870		512,770
Unbilled Revenues		161,872		229,326
Fuel, Materials and Supplies		229,837		277,085
Marketable Securities		81,960		66,236
Derivative Assets		17,379		31,785
Prepayments and Other Current Assets		151,641		123,700
Total Current Assets		1,243,571		1,267,854
Property, Plant and Equipment, Net		8,957,713		8,839,965
Deferred Debits and Other Assets:
Regulatory Assets		3,207,971		3,244,931
Goodwill		287,591		287,591
Marketable Securities		41,763		54,905
Derivative Assets		153,651		189,751
Other Long-Term Assets		213,186		172,682
Total Deferred Debits and Other Assets		3,904,162		3,949,860
Total Assets	$	14,105,446	$	14,057,679
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

NORTHEAST UTILITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
		March 31,		December 31,
(Thousands of Dollars)		2010		2009
LIABILITIES AND CAPITALIZATION
Current Liabilities:
Notes Payable to Banks	$	100,313	$	100,313
Long-Term Debt - Current Portion		66,286		66,286
Accounts Payable		385,181		457,582
Accrued Taxes		64,236		50,246
Accrued Interest		92,879		83,763
Derivative Liabilities		44,208		37,617
Other Current Liabilities		166,138		183,605
Total Current Liabilities		919,241		979,412
Rate Reduction Bonds		375,866		442,436
Deferred Credits and Other Liabilities:
Accumulated Deferred Income Taxes		1,450,931		1,380,143
Accumulated Deferred Investment Tax Credits		21,466		22,145
Regulatory Liabilities		426,687		485,706
Derivative Liabilities		972,041		955,646
Accrued Pension		786,195		781,431
Other Long-Term Liabilities		822,759		823,723
Total Deferred Credits and Other Liabilities		4,480,079		4,448,794
Capitalization:
Long-Term Debt		4,588,862		4,492,935
Noncontrolling Interest in Consolidated Subsidiary:
Preferred Stock Not Subject to Mandatory Redemption		116,200		116,200
Common Shareholders' Equity:
Common Shares		978,381		977,276
Capital Surplus, Paid In		1,763,894		1,762,097
Deferred Contribution Plan		(67)		(2,944)
Retained Earnings		1,287,271		1,246,543
Accumulated Other Comprehensive Loss		(42,740)		(43,467)
Treasury Stock		(361,541)		(361,603)
Common Shareholders' Equity		3,625,198		3,577,902
Total Capitalization		8,330,260		8,187,037
Total Liabilities and Capitalization	$	14,105,446	$	14,057,679
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

NORTHEAST UTILITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
		Three Months Ended March 31,
(Thousands of Dollars, Except Share Information)		2010		2009
Operating Revenues	$	1,339,420	$	1,593,483
Operating Expenses:
Fuel, Purchased and Net Interchange Power		603,349		838,920
Other Operating Expenses		248,273		247,445
Maintenance		45,637		48,836
Depreciation		78,656		76,983
Amortization of Regulatory (Liabilities)/Assets, Net		(8,327)		21,691
Amortization of Rate Reduction Bonds		59,570		55,897
Taxes Other Than Income Taxes		85,599		86,429
Total Operating Expenses		1,112,757		1,376,201
Operating Income		226,663		217,282
Interest Expense:
Interest on Long-Term Debt		57,270		55,684
Interest on Rate Reduction Bonds		6,690		10,625
Other Interest		3,302		4,668
Interest Expense		67,262		70,977
Other Income, Net		8,057		4,182
Income Before Income Tax Expense		167,458		150,487
Income Tax Expense		79,857		51,423
Net Income		87,601		99,064
Net Income Attributable to Noncontrolling Interest:
Preferred Dividends of Subsidiary		1,390		1,390
Net Income Attributable to Controlling Interest	$	86,211	$	97,674
Basic and Fully Diluted Earnings Per Common Share	$	0.49	$	0.60
Dividends Declared Per Common Share	$	0.26	$	0.24
Weighted Average Common Shares Outstanding:
Basic		176,349,762		162,340,475
Fully Diluted		176,537,472		162,925,167
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

NORTHEAST UTILITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		Three Months Ended March 31,
(Thousands of Dollars)		2010		2009
Operating Activities:
Net Income	$	87,601	$	99,064
Adjustments to Reconcile Net Income to Net Cash Flows
Provided by Operating Activities:
Bad Debt Expense		9,556		9,507
Depreciation		78,656		76,983
Deferred Income Taxes		33,248		17,178
Pension and PBOP Expense, Net of Capitalized Portion and PBOP Contributions		23,331		6,703
Regulatory Overrecoveries/(Underrecoveries), Net		6,066		(14,694)
Amortization of Regulatory (Liabilities)/Assets, Net		(8,327)		21,691
Amortization of Rate Reduction Bonds		59,570		55,897
Deferred Contractual Obligations		(6,274)		(8,666)
Derivative Assets and Liabilities		(2,594)		(14,769)
Other		(35,160)		(3,450)
Changes in Current Assets and Liabilities:
Receivables and Unbilled Revenues, Net		(7,258)		10,483
Fuel, Materials and Supplies		48,431		51,171
Taxes Receivable/Accrued		4,639		43,270
Other Current Assets		(279)		(1,541)
Accounts Payable		(46,188)		(174,497)
Counterparty Deposits and Margin Special Deposits		(12,946)		(10,582)
Other Current Liabilities		(6,369)		(23,795)
Net Cash Flows Provided by Operating Activities		225,703		139,953
Investing Activities:
Investments in Property and Plant		(202,487)		(208,896)
Proceeds from Sales of Marketable Securities		21,331		52,933
Purchases of Marketable Securities		(21,825)		(54,557)
Rate Reduction Bond Escrow and Other Deposits		(322)		(1,480)
Other Investing Activities		(156)		2,853
Net Cash Flows Used in Investing Activities		(203,459)		(209,147)
Financing Activities:
Issuance of Common Shares		-		387,350
Cash Dividends on Common Shares		(45,088)		(37,207)
Cash Dividends on Preferred Stock		(1,390)		(1,390)
Decrease in Short-Term Debt		-		(124,909)
Issuance of Long-Term Debt		95,000		250,000
Retirements of Rate Reduction Bonds		(66,569)		(62,451)
Financing Fees		(1,124)		(15,205)
Other Financing Activities		(13)		18
Net Cash Flows (Used in)/Provided by Financing Activities		(19,184)		396,206
Net Increase in Cash and Cash Equivalents		3,060		327,012
Cash and Cash Equivalents - Beginning of Period		26,952		89,816
Cash and Cash Equivalents - End of Period	$	30,012	$	416,828
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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6

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES

7

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
		March 31,		December 31,
(Thousands of Dollars)		2010		2009
ASSETS
Current Assets:
Cash	$	3,527	$	45
Receivables, Net		349,152		327,969
Accounts Receivable from Affiliated Companies		4,552		2,362
Notes Receivable from Affiliated Companies		34,675		97,775
Unbilled Revenues		94,134		140,632
Materials and Supplies		62,917		65,623
Derivative Assets		8,132		24,593
Prepayments and Other Current Assets		40,807		18,385
Total Current Assets		597,896		677,384
Property, Plant and Equipment, Net		5,386,314		5,340,561
Deferred Debits and Other Assets:
Regulatory Assets		2,041,668		2,068,778
Derivative Assets		137,825		183,231
Other Long-Term Assets		106,623		94,610
Total Deferred Debits and Other Assets		2,286,116		2,346,619
Total Assets	$	8,270,326	$	8,364,564
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
		March 31,		December 31,
(Thousands of Dollars)		2010		2009
LIABILITIES AND CAPITALIZATION
Current Liabilities:
Long-Term Debt - Current Portion	$	62,000	$	62,000
Accounts Payable		197,199		242,853
Accounts Payable to Affiliated Companies		53,042		48,795
Accrued Taxes		46,063		36,860
Accrued Interest		46,572		49,867
Derivative Liabilities		13,488		9,770
Other Current Liabilities		94,168		100,846
Total Current Liabilities		512,532		550,991
Rate Reduction Bonds		144,901		195,587
Deferred Credits and Other Liabilities:
Accumulated Deferred Income Taxes		942,858		901,527
Accumulated Deferred Investment Tax Credits		15,791		16,355
Regulatory Liabilities		263,124		316,160
Derivative Liabilities		922,977		913,349
Accrued Pension		47,338		51,319
Other Long-Term Liabilities		399,526		409,532
Total Deferred Credits and Other Liabilities		2,591,614		2,608,242
Capitalization:
Long-Term Debt		2,520,518		2,520,361
Preferred Stock Not Subject to Mandatory Redemption		116,200		116,200
Common Stockholder's Equity:
Common Stock		60,352		60,352
Capital Surplus, Paid In		1,601,879		1,601,792
Retained Earnings		725,383		714,210
Accumulated Other Comprehensive Loss		(3,053)		(3,171)
Common Stockholder's Equity		2,384,561		2,373,183
Total Capitalization		5,021,279		5,009,744
Total Liabilities and Capitalization	$	8,270,326	$	8,364,564
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

9

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
		Three Months Ended March 31,
(Thousands of Dollars)		2010		2009
Operating Revenues	$	794,980	$	954,503
Operating Expenses:
Fuel, Purchased and Net Interchange Power		362,820		514,386
Other Operating Expenses		134,813		139,411
Maintenance		21,838		27,115
Depreciation		47,525		46,433
Amortization of Regulatory Assets, Net		1,671		13,007
Amortization of Rate Reduction Bonds		43,283		40,557
Taxes Other Than Income Taxes		57,531		58,189
Total Operating Expenses		669,481		839,098
Operating Income		125,499		115,405
Interest Expense:
Interest on Long-Term Debt		33,632		31,686
Interest on Rate Reduction Bonds		3,032		5,799
Other Interest		1,863		209
Interest Expense		38,527		37,694
Other Income, Net		4,933		2,708
Income Before Income Tax Expense		91,905		80,419
Income Tax Expense		43,493		27,284
Net Income	$	48,412	$	53,135
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

10

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		Three Months Ended March 31,
(Thousands of Dollars)		2010		2009
Operating Activities:
Net Income	$	48,412	$	53,135
Adjustments to Reconcile Net Income to Net Cash Flows
Provided by Operating Activities:
Bad Debt Expense		2,832		2,644
Depreciation		47,525		46,433
Deferred Income Taxes		18,956		19,240
Pension and PBOP Expense/(Income), Net of Capitalized Portion and PBOP Contributions		3,602		(2,437)
Regulatory Underrecoveries, Net		(230)		(25,050)
Amortization of Regulatory Assets, Net		1,671		13,007
Amortization of Rate Reduction Bonds		43,283		40,557
Deferred Contractual Obligations		(4,304)		(5,730)
Other		(17,127)		(3,062)
Changes in Current Assets and Liabilities:
Receivables and Unbilled Revenues, Net		8,773		29,919
Materials and Supplies		2,706		(974)
Taxes Receivable/Accrued		340		33,199
Other Current Assets		(10,122)		(9,736)
Accounts Payable		(25,350)		(55,938)
Other Current Liabilities		2,872		(13,638)
Net Cash Flows Provided by Operating Activities		123,839		121,569
Investing Activities:
Investments in Property and Plant		(97,725)		(116,325)
Decrease/(Increase) in NU Money Pool Lending		63,100		(28,488)
Rate Reduction Bond Escrow and Other Deposits		2,289		(2,185)
Other Investing Activities		(14)		1,491
Net Cash Flows Used in Investing Activities		(32,350)		(145,507)
Financing Activities:
Cash Dividends on Common Stock		(35,849)		(28,462)
Cash Dividends on Preferred Stock		(1,390)		(1,390)
Decrease in Short-Term Debt		-		(74,001)
Decrease in NU Money Pool Borrowings		-		(102,725)
Capital Contributions from NU Parent		-		39,000
Issuance of Long-Term Debt		-		250,000
Retirements of Rate Reduction Bonds		(50,686)		(47,493)
Other Financing Activities		(82)		(2,784)
Net Cash Flows (Used in)/Provided by Financing Activities		(88,007)		32,145
Net Increase in Cash		3,482		8,207
Cash - Beginning of Period		45		-
Cash - End of Period	$	3,527	$	8,207
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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12

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

13

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
		March 31,		December 31,
(Thousands of Dollars)		2010		2009
ASSETS
Current Assets:
Cash	$	2,247	$	1,974
Receivables, Net		93,481		89,337
Accounts Receivable from Affiliated Companies		1,583		286
Unbilled Revenues		41,043		49,358
Taxes Receivable		16,325		22,600
Fuel, Materials and Supplies		113,660		127,447
Prepayments and Other Current Assets		29,050		36,387
Total Current Assets		297,389		327,389
Property, Plant and Equipment, Net		1,856,891		1,814,714
Deferred Debits and Other Assets:
Regulatory Assets		497,709		494,077
Other Long-Term Assets		83,458		61,011
Total Deferred Debits and Other Assets		581,167		555,088
Total Assets	$	2,735,447	$	2,697,191
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

14

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
		March 31,		December 31,
(Thousands of Dollars)		2010		2009
LIABILITIES AND CAPITALIZATION
Current Liabilities:
Notes Payable to Affiliated Companies	$	12,400	$	26,700
Accounts Payable		103,778		109,521
Accounts Payable to Affiliated Companies		23,824		20,083
Accrued Interest		16,803		10,255
Derivative Liabilities		25,484		18,785
Other Current Liabilities		25,263		27,983
Total Current Liabilities		207,552		213,327
Rate Reduction Bonds		176,151		188,113
Deferred Credits and Other Liabilities:
Accumulated Deferred Income Taxes		290,724		275,669
Accumulated Deferred Investment Tax Credits		190		211
Regulatory Liabilities		69,732		69,872
Derivative Liabilities		9,691		7,635
Accrued Pension		277,885		272,905
Other Long-Term Liabilities		113,104		105,759
Total Deferred Credits and Other Liabilities		761,326		732,051
Capitalization:
Long-Term Debt		836,282		836,255
Common Stockholder's Equity:
Common Stock		-		-
Capital Surplus, Paid In		443,660		420,169
Retained Earnings		311,153		307,988
Accumulated Other Comprehensive Loss		(677)		(712)
Common Stockholder's Equity		754,136		727,445
Total Capitalization		1,590,418		1,563,700
Total Liabilities and Capitalization	$	2,735,447	$	2,697,191
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

15

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
		Three Months Ended March 31,
(Thousands of Dollars)		2010		2009
Operating Revenues	$	258,568	$	307,653
Operating Expenses:
Fuel, Purchased and Net Interchange Power		103,771		146,225
Other Operating Expenses		63,125		62,728
Maintenance		16,002		15,522
Depreciation		15,968		15,171
Amortization of Regulatory (Liabilities)/Assets, Net		(5,694)		7,947
Amortization of Rate Reduction Bonds		12,391		11,686
Taxes Other Than Income Taxes		13,079		12,244
Total Operating Expenses		218,642		271,523
Operating Income		39,926		36,130
Interest Expense:
Interest on Long-Term Debt		9,512		8,104
Interest on Rate Reduction Bonds		2,721		3,658
Other Interest		179		792
Interest Expense		12,412		12,554
Other Income, Net		2,412		1,425
Income Before Income Tax Expense		29,926		25,001
Income Tax Expense		14,116		7,506
Net Income	$	15,810	$	17,495
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

16

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		Three Months Ended March 31,
(Thousands of Dollars)		2010		2009
Operating Activities:
Net Income	$	15,810	$	17,495
Adjustments to Reconcile Net Income to Net Cash Flows
Provided by Operating Activities:
Bad Debt Expense		2,496		1,628
Depreciation		15,968		15,171
Deferred Income Taxes		8,474		(7,981)
Pension and PBOP Expense, Net of Capitalized Portion and PBOP Contributions		6,911		4,143
Regulatory (Underrecoveries)/Overrecoveries, Net		(2,073)		3,413
Amortization of Regulatory (Liabilities)/Assets, Net		(5,694)		7,947
Amortization of Rate Reduction Bonds		12,391		11,686
Deferred Contractual Obligations		(782)		(1,394)
Other		(14,937)		886
Changes in Current Assets and Liabilities:
Receivables and Unbilled Revenues, Net		378		(13,111)
Fuel, Materials and Supplies		14,971		4,921
Taxes Receivable/Accrued		6,275		19,279
Other Current Assets		11,078		8,170
Accounts Payable		(1,599)		(66,171)
Other Current Liabilities		3,007		5,990
Net Cash Flows Provided by Operating Activities		72,674		12,072
Investing Activities:
Investments in Property and Plant		(54,139)		(52,531)
Decrease in NU Money Pool Lending		-		48,200
Other Investing Activities		(2,760)		(378)
Net Cash Flows Used in Investing Activities		(56,899)		(4,709)
Financing Activities:
Cash Dividends on Common Stock		(12,645)		(10,211)
Decrease in NU Money Pool Borrowings		(14,300)		-
Capital Contributions from NU Parent		23,456		15,000
Retirements of Rate Reduction Bonds		(11,962)		(11,278)
Other Financing Activities		(51)		(113)
Net Cash Flows Used in Financing Activities		(15,502)		(6,602)
Net Increase in Cash		273		761
Cash - Beginning of Period		1,974		195
Cash - End of Period	$	2,247	$	956
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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18

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

19

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
		March 31,		December 31,
(Thousands of Dollars)		2010		2009
ASSETS
Current Assets:
Cash	$	1	$	1
Receivables, Net		41,030		38,415
Accounts Receivable from Affiliated Companies		1,164		191
Notes Receivable from Affiliated Companies		5,700		-
Unbilled Revenues		13,175		16,090
Taxes Receivable		4,321		4,192
Materials and Supplies		9,363		8,314
Marketable Securities		41,576		28,261
Prepayments and Other Current Assets		1,462		1,774
Total Current Assets		117,792		97,238
Property, Plant and Equipment, Net		721,435		705,760
Deferred Debits and Other Assets:
Regulatory Assets		235,240		240,804
Marketable Securities		15,252		28,500
Other Long-Term Assets		33,691		29,498
Total Deferred Debits and Other Assets		284,183		298,802
Total Assets	$	1,123,410	$	1,101,800
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

20

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
		March 31,		December 31,
(Thousands of Dollars)		2010		2009
LIABILITIES AND CAPITALIZATION
Current Liabilities:
Notes Payable to Affiliated Companies	$	-	$	136,100
Accounts Payable		36,594		36,680
Accounts Payable to Affiliated Companies		9,699		7,924
Accrued Interest		2,002		5,274
Other Current Liabilities		7,716		8,873
Total Current Liabilities		56,011		194,851
Rate Reduction Bonds		54,815		58,735
Deferred Credits and Other Liabilities:
Accumulated Deferred Income Taxes		215,571		211,391
Accumulated Deferred Investment Tax Credits		1,499		1,499
Regulatory Liabilities		19,643		21,683
Other Long-Term Liabilities		60,822		61,359
Total Deferred Credits and Other Liabilities		297,535		295,932
Capitalization:
Long-Term Debt		400,165		305,475
Common Stockholder's Equity:
Common Stock		10,866		10,866
Capital Surplus, Paid In		211,556		145,400
Retained Earnings		92,487		90,549
Accumulated Other Comprehensive Loss		(25)		(8)
Common Stockholder's Equity		314,884		246,807
Total Capitalization		715,049		552,282
Total Liabilities and Capitalization	$	1,123,410	$	1,101,800
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

21

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
		Three Months Ended March 31,
(Thousands of Dollars)		2010		2009
Operating Revenues	$	100,207	$	118,081
Operating Expenses:
Fuel, Purchased and Net Interchange Power		43,632		63,235
Other Operating Expenses		23,226		22,664
Maintenance		4,542		3,106
Depreciation		5,953		5,528
Amortization of Regulatory (Liabilities)/Assets, Net		(1,570)		670
Amortization of Rate Reduction Bonds		3,895		3,654
Taxes Other Than Income Taxes		4,084		3,897
Total Operating Expenses		83,762		102,754
Operating Income		16,445		15,327
Interest Expense:
Interest on Long-Term Debt		3,881		3,443
Interest on Rate Reduction Bonds		937		1,168
Other Interest		126		627
Interest Expense		4,944		5,238
Other Income/(Loss), Net		604		(154)
Income Before Income Tax Expense		12,105		9,935
Income Tax Expense		6,446		3,789
Net Income	$	5,659	$	6,146
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

22

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		Three Months Ended March 31,
(Thousands of Dollars)			2010		2009
Operating Activities:
Net Income	$		5,659	$	6,146
Adjustments to Reconcile Net Income to Net Cash Flows
Provided by/(Used in) Operating Activities:
Bad Debt Expense			1,567		2,217
Depreciation			5,953		5,528
Deferred Income Taxes			2,935		2,033
Pension and PBOP Expense/(Income), Net of Capitalized Portion and PBOP Contributions			565		(621)
Regulatory Underrecoveries, Net			(2,748)		(1,099)
Amortization of Regulatory (Liabilities)/Assets, Net			(1,570)		670
Amortization of Rate Reduction Bonds			3,895		3,654
Deferred Contractual Obligations			(1,187)		(1,543)
Other			722		(1,353)
Changes in Current Assets and Liabilities:
Receivables and Unbilled Revenues, Net			(1,768)		(1,981)
Materials and Supplies			(1,049)		(59)
Taxes Receivable/Accrued			(129)		4,016
Accounts Payable			(75)		(20,148)
Other Current Assets and Liabilities			(4,019)		(5,348)
Net Cash Flows Provided by/(Used in) Operating Activities			8,751		(7,888)
Investing Activities:
Investments in Property and Plant			(19,111)		(19,230)
Proceeds from Sales of Marketable Securities			11,086		35,722
Purchases of Marketable Securities			(11,175)		(36,517)
Increase in NU Money Pool Lending			(5,700)		-
Other Investing Activities			(123)		369
Net Cash Flows Used in Investing Activities			(25,023)		(19,656)
Financing Activities:
Cash Dividends on Common Stock			(3,721)		(7,550)
Increase in Short-Term Debt			-		45,227
Issuance of Long-Term Debt			95,000		-
Decrease in NU Money Pool Borrowings			(136,100)		(4,800)
Retirements of Rate Reduction Bonds			(3,921)		(3,679)
Capital Contributions from NU Parent			66,143		-
Financing Fees			(1,124)		-
Other Financing Activities			(5)		(10)
Net Cash Flows Provided by Financing Activities			16,272		29,188
Net Increase in Cash			-		1,644
Cash - Beginning of Period			1		-
Cash - End of Period	$		1	$	1,644
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

23

NORTHEAST UTILITIES AND SUBSIDIARIES

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.

Presentation

Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the SEC.  The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the entirety of this combined Quarterly Report on Form 10-Q and the combined 2009 Annual Report on Form 10-K of Northeast Utilities (NU or the Company), CL&P, PSNH, and WMECO, which was filed with the SEC (NU 2009 Form 10-K).  The accompanying unaudited condensed consolidated financial statements contain, in the opinion of management, all adjustments (including normal, recurring adjustments) necessary to present fairly NU's and the above companies' financial positions as of March 31, 2010 and December 31, 2009, and the results of operations and cash flows for the three months ended March 31, 2010 a nd 2009.  The results of operations and cash flows for the three months ended March 31, 2010 and 2009 are not necessarily indicative of the results expected for a full year.  

Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout the combined notes to the unaudited condensed consolidated financial statements.

The unaudited condensed consolidated financial statements of NU, CL&P, PSNH and WMECO include the accounts of all their respective subsidiaries.  Intercompany transactions have been eliminated in consolidation.  

In accordance with accounting guidance on the consolidation of VIEs, the Company evaluates its variable interests to determine if it has a controlling financial interest in a VIE that would require consolidation.  The Company’s variable interests primarily include contracts with developers of power plants that are required by regulation and provide for regulatory recovery of contract costs and benefits through customer rates.  The Company would consolidate a VIE if it had both the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses of or receive benefits from the entity that could potentially be significant to the VIE.  

For each variable interest, NU evaluates the activities of the power plant that most significantly impact the VIE’s economic performance to determine whether it has control over those activities.  NU’s assessment of control includes an analysis of who operates and maintains the power plant including dispatch rights and who controls the activities of the power plant after the expiration of its power purchase agreement with NU.  NU also evaluates its exposure to potentially significant losses and benefits of the VIE.  As of March 31, 2010, NU held variable interests in VIEs through agreements with certain entities that are single power plant owners of renewable energy, peaking generation and other independent power producers.  NU does not control the activities that are economically significant to these VIEs or provide financial or other support to these VIEs.  NU does not have financial exposure because the costs and benefits of all of these arrangements are fully recoverable from or refundable to NU’s customers.  As of March 31, 2010, NU was not identified as the primary beneficiary of any power plant VIEs.  Therefore, the company does not consolidate any VIEs.  The Company does not have any variable interest in a VIE that is material to the accompanying unaudited condensed consolidated financial statements.

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Certain reclassifications of prior period data were made in the accompanying unaudited condensed consolidated balance sheets for CL&P, PSNH, and WMECO and the statements of cash flows for NU, PSNH, and WMECO.  These reclassifications were made to conform to the current period's presentation.  

NU evaluates events and transactions that occur after the balance sheet date but before financial statements are issued and recognizes in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed as of the balance sheet date and discloses but does not recognize in the financial statements subsequent events that provide evidence about the conditions that arose after the balance sheet date but before the financial statements are issued.  See Note 12, "Subsequent Events," for further information.

B.

Fair Value Measurements

NU, including CL&P, PSNH, and WMECO, applies fair value measurement guidance to the Regulated and unregulated companies' derivative contracts recorded at fair value and to the marketable securities held in the NU supplemental benefit trust and WMECO's spent nuclear fuel trust.  Fair value measurement guidance is also applied to investment valuations used to calculate the funded status

24

of NU's Pension and PBOP plans and non-recurring fair value measurements of NU's non-financial assets and liabilities, such as AROs and Yankee Gas' goodwill.  

Fair Value Hierarchy:  In measuring fair value, NU uses observable market data when available and minimizes the use of unobservable inputs.  Unobservable inputs are needed to value certain derivative contracts due to complexities in the terms of the contracts.  Inputs used in fair value measurements are categorized into three fair value hierarchy levels for disclosure purposes.  The entire fair value measurement is categorized based on the lowest level of input that is significant to the fair value measurement.  NU evaluates the classification of assets and liabilities measured at fair value on a quarterly basis, and NU’s policy is to recognize transfers between levels of the fair value hierarchy as of the end of the reporting period.  The three levels of the fair value hierarchy are described below:

Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities as of the reporting date.  Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.  

Level 2 - Inputs are quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs are observable.

Level 3 - Quoted market prices are not available.  Fair value is derived from valuation techniques in which one or more significant inputs or assumptions are unobservable.  Where possible, valuation techniques incorporate observable market inputs that can be validated to external sources such as industry exchanges, including prices of energy and energy-related products.  Significant unobservable inputs are used in the valuations, including items such as energy and energy-related product prices in future years for which observable prices are not yet available, future contract quantities under full-requirements or supplemental sales contracts, and market volatilities.  Items valued using these valuation techniques are classified according to the lowest level for which there is at least one input that is significant to the valuation.  Therefore, an item may be classified in Level 3 even though the re may be some significant inputs that are readily observable.

Determination of Fair Value:  The valuation techniques and inputs used in NU's fair value measurements are described in Note 2, "Derivative Instruments," and Note 9, "Marketable Securities," to the unaudited condensed consolidated financial statements.  There were no changes to the valuation methodologies for derivative instruments or marketable securities for the three months ended March 31, 2010 and December 31, 2009.  

C.

Regulatory Accounting

The transmission and distribution segments of CL&P, PSNH (including its generation business) and WMECO, along with Yankee Gas' distribution segment (collectively, the Regulated companies), continue to be rate-regulated on a cost-of-service basis, therefore, the accounting policies of the Regulated companies conform to GAAP applicable to rate-regulated enterprises and historically reflect the effects of the rate-making process.  

Management believes it is probable that the Regulated companies will recover their respective investments in long-lived assets, including regulatory assets.  All material net regulatory assets are earning an equity return, except for the majority of deferred benefit cost assets, regulatory assets offsetting derivative liabilities, securitized regulatory assets and income tax assets, which are not supported by equity.  Amortization and deferrals of regulatory assets/(liabilities) are primarily included on a net basis in Amortization of regulatory assets/(liabilities), net on the accompanying unaudited condensed consolidated statements of income.  

Regulatory Assets:  The components of regulatory assets are as follows:  

	As of March 31, 2010		As of December 31, 2009
(Millions of Dollars)	NU		NU
Deferred benefit costs	$	1,111.0	$	1,132.1
Regulatory assets offsetting derivative liabilities		872.2		855.6
Securitized assets		366.0		432.9
Income taxes, net		372.7		363.2
Unrecovered contractual obligations		144.2		149.5
Regulatory tracker deferrals		131.0		104.1
Storm cost deferral		64.9		60.0
Asset retirement obligations		43.7		42.9
Losses on reacquired debt		23.3		24.0
Environmental costs		31.6		24.6
Other regulatory assets		47.4		56.0
Totals	$	3,208.0	$	3,244.9

25

	As of March 31, 2010						As of December 31, 2009
(Millions of Dollars)	CL&P		PSNH		WMECO		CL&P		PSNH		WMECO
Deferred benefit costs	$	493.3	$	150.7	$	103.1	$	502.4	$	154.2	$	104.9
Regulatory assets offsetting derivative liabilities		836.3		35.2		-		828.6		26.4		-
Securitized assets		144.8		167.7		53.5		195.4		180.1		57.4
Income taxes, net		309.0		25.2		17.2		304.1		21.9		16.9
Unrecovered contractual obligations		113.8		-		30.4		118.0		-		31.5
Regulatory tracker deferrals		90.8		22.0		15.2		70.3		19.0		11.3
Storm cost deferral		5.7		48.7		10.5		-		50.8		9.2
Asset retirement obligations		24.4		14.2		2.8		23.8		14.0		2.8
Losses on reacquired debt		12.3		9.0		0.4		12.7		9.2		0.4
Environmental costs		-		8.7		-		-		1.3		-
Other regulatory assets		11.3		16.3		2.1		13.5		17.2		6.4
Totals	$	2,041.7	$	497.7	$	235.2	$	2,068.8	$	494.1	$	240.8

Additionally, the Regulated companies had $72.6 million ($24.8 million for CL&P, $25.3 million for PSNH, and $11.5 million for WMECO) and $27.1 million ($9.9 million for CL&P and $9.1 million for WMECO) of regulatory costs as of March 31, 2010 and December 31, 2009, respectively, which were included in Other long-term assets on the accompanying unaudited condensed consolidated balance sheets.  These amounts represent incurred costs that have not yet been approved for recovery by the applicable regulatory agency.  Of the total March 31, 2010 amount, $24.4 million ($13.7 million for CL&P, $5.3 million for PSNH, and $2.8 million for WMECO) relates to the 2010 Healthcare Act.  For further information, see Note 1I, "Summary of Significant Accounting Policies - Income Taxes," to the unaudited condensed consolidated financial statements.  The $25.3 million at PSNH also includes $20 million of costs incurred for the February 2010 winter storm restorations that met the NHPUC specified criteria for deferral to a major storm cost reserve.  Management believes these costs are probable of recovery in future cost-of-service regulated rates.  

CL&P deferred $14.2 million of costs for the March 2010 winter storm restorations that met the DPUC criteria for a major storm.  CL&P is allowed to collect from customers $3 million per year for major storm costs.  Of the $14.2 million, CL&P had previously collected $8.5 million from customers and has established a regulatory asset for the remaining $5.7 million of storm costs.

Regulatory Liabilities:  The components of regulatory liabilities are as follows:  

	As of March 31, 2010		As of December 31, 2009
(Millions of Dollars)	NU		NU
Cost of removal	$	209.6	$	209.2
Regulatory liabilities offsetting derivative assets		42.9		109.4
Regulatory tracker deferrals		72.6		62.5
AFUDC transmission incentive (Note 1F)		52.4		51.1
Pension and PBOP liabilities - Yankee Gas acquisition		14.4		15.0
Overrecovered natural gas costs		7.4		7.1
Other regulatory liabilities		27.4		31.4
Totals	$	426.7	$	485.7

	As of March 31, 2010						As of December 31, 2009
(Millions of Dollars)	CL&P		PSNH		WMECO		CL&P		PSNH		WMECO
Cost of removal	$	82.5	$	61.0	$	16.1	$	82.2	$	60.5	$	16.6
Regulatory liabilities offsetting   derivative assets		42.9		-		-		109.0		0.4		-
Regulatory tracker deferrals		66.9		5.7		-		56.0		4.4		2.1
AFUDC transmission incentive  (Note 1F)		51.6		-		0.8		50.4		-		0.7
WMECO provision for rate refunds		-		-		2.0		-		-		2.0
Other regulatory liabilities		19.2		3.0		0.7		18.6		4.6		0.3
Totals	$	263.1	$	69.7	$	19.6	$	316.2	$	69.9	$	21.7

26

D.

Property, Plant and Equipment and Accumulated Depreciation

The following tables summarize the NU, CL&P, PSNH, and WMECO investments in utility plant as of March 31, 2010 and December 31, 2009:

	As of March 31,		As of December 31,
	2010		2009
(Millions of Dollars)	NU		NU
Distribution – electric	$	5,963.7	$	5,893.9
Distribution - natural gas		1,081.8		1,071.1
Transmission		3,227.5		3,219.2
Generation		658.1		660.1
Electric and natural gas utility		10,931.1		10,844.3
Other (1)		269.7		265.6
Total property, plant and equipment, gross		11,200.8		11,109.9
Less:  accumulated depreciation
Electric and natural gas utility		(2,765.6)		(2,721.3)
Other		(123.7)		(120.3)
Total accumulated depreciation		(2,889.3)		(2,841.6)
Net property, plant and equipment		8,311.5		8,268.3
Construction work in progress		646.2		571.7
Total property, plant and equipment, net	$	8,957.7	$	8,840.0

⁽¹⁾

These assets primarily relate to RRR ($144.4 million and $143.8 million) and NUSCO ($112.5 million and $109 million) as of March 31, 2010 and December 31, 2009, respectively.  

	As of March 31, 2010						As of December 31, 2009
(Millions of Dollars)	CL&P		PSNH		WMECO		CL&P		PSNH		WMECO
Distribution	$	4,012.8	$	1,317.1	$	664.6	$	3,960.1	$	1,309.2	$	654.9
Transmission		2,578.1		449.6		199.8		2,573.2		450.2		195.7
Generation		-		658.1		-		-		660.1		-
Total property, plant and equipment, gross		6,590.9		2,424.8		864.4		6,533.3		2,419.5		850.6
Less: accumulated depreciation		(1,452.3)		(811.4)		(225.8)		(1,426.6)		(805.5)		(218.2)
Net property, plant and equipment		5,138.6		1,613.4		638.6		5,106.7		1,614.0		632.4
Construction work in progress		247.7		243.5		82.8		233.9		200.7		73.4
Total property, plant and equipment, net	$	5,386.3	$	1,856.9	$	721.4	$	5,340.6	$	1,814.7	$	705.8

E.

Provision for Uncollectible Accounts

NU, including CL&P, PSNH and WMECO, maintain a provision for uncollectible accounts to record their receivables at an estimated net realizable value.  This provision is determined based upon a variety of factors, including applying an estimated uncollectible account percentage to each receivable aging category, historical collection and write-off experience and management’s assessment of collectibility from individual customers.  Management reviews at least quarterly the collectibility of the receivables, and if circumstances change, collectibility estimates are adjusted accordingly.  Receivable balances are written-off against the provision for uncollectible accounts when these balances are deemed to be uncollectible and the accounts are terminated.  

The provision for uncollectible accounts as of March 31, 2010 and December 31, 2009, which are included in Receivables, net on the accompanying unaudited condensed consolidated balance sheets, were as follows:

(Millions of Dollars)	As of March 31, 2010		As of December 31, 2009
NU	$	57.2	$	55.3
CL&P		27.1		26.1
PSNH		5.7		5.1
WMECO		7.5		7.2

F.

Allowance for Funds Used During Construction

AFUDC is included in the cost of the Regulated companies' utility plant and represents the cost of borrowed and equity funds used to finance construction.  The portion of AFUDC attributable to borrowed funds is recorded as a reduction of Other interest expense, and the AFUDC related to equity funds is recorded as Other income, net on the accompanying unaudited condensed consolidated statements of income.

	For the Three Months Ended
	March 31, 2010		March 31, 2009
(Millions of Dollars, except percentages)	NU		NU
AFUDC:
Borrowed funds	$	1.9	$	2.1
Equity funds		3.1		0.9
Totals	$	5.0	$	3.0
Average AFUDC rates		6.5%		5.2%

27

	For the Three Months Ended
	March 31, 2010						March 31, 2009
(Millions of Dollars, except percentages)	CL&P		PSNH		WMECO		CL&P		PSNH		WMECO
AFUDC:
Borrowed funds	$	0.7	$	1.2	$	-	$	0.9	$	0.9	$	0.1
Equity funds		1.2		1.9		-		-		0.9		-
Totals	$	1.9	$	3.1	$	-	$	0.9	$	1.8	$	0.1
Average AFUDC rates		8.0%		6.3%		0.4%		3.2%		8.1%		3.8%

The Regulated companies' average AFUDC rate is based on a FERC-prescribed formula that produces an average rate using the cost of a company's short-term financings as well as a company's capitalization (preferred stock, long-term debt and common equity).  The average rate is applied to average eligible CWIP amounts to calculate AFUDC.  AFUDC is recorded on 100 percent of CL&P's and WMECO's CWIP for their NEEWS projects, all of which is being reserved as a regulatory liability to reflect current rate base recovery for 100 percent of the CWIP as a result of FERC-approved transmission incentives.

G.

Other Income, Net

The pre-tax components of other income/(loss) items are as follows:

	For the Three Months Ended
	March 31, 2010		March 31, 2009
(Million of Dollars)	NU		NU
Other Income:
Investment income	$	1.9	$	1.3
Interest income		0.8		0.8
AFUDC - equity funds		3.1		0.9
Energy Independence Act incentives		1.3		3.6
Other		1.0		0.9
Total Other Income		8.1		7.5
Other Loss:
Investment losses		-		(3.2)
Rental expense		-		(0.1)
Total Other Loss		-		(3.3)
Total Other Income, Net	$	8.1	$	4.2

	For the Three Months Ended
	March 31, 2010						March 31, 2009
(Millions of Dollars)	CL&P		PSNH		WMECO		CL&P		PSNH		WMECO
Other Income:
Investment income	$	1.3	$	0.3	$	0.3	$	1.0	$	0.2	$	0.2
Interest income		0.6		0.2		0.1		-		0.8		-
AFUDC - equity funds		1.2		1.9		-		-		0.9		-
Energy Independence Act incentives		1.3		-		-		3.6		-		-
Other		0.5		-		0.2		0.3		-		0.1
Total Other Income		4.9		2.4		0.6		4.9		1.9		0.3
Investment losses		-		-		-		(2.2)		(0.5)		(0.5)
Total Other Income/(Loss), Net	$	4.9	$	2.4	$	0.6	$	2.7	$	1.4	$	(0.2)

Other income - other includes equity in earnings of the Yankee companies and regional transmission companies of $0.3 million and $0.5 million for NU (de minimis amount and $0.1 million for CL&P and de minimis amounts for PSNH and WMECO in both periods) for the three months ended March 31, 2010 and 2009, respectively.  Equity in earnings relates to the Company's investments, including investments of CL&P, PSNH and WMECO in Connecticut Yankee Atomic Power Company, Maine Yankee Atomic Power Company, and Yankee Atomic Electric Company, and NU's investments in two regional transmission companies.  For the three months ended March 31, 2010 and 2009, income tax expense associated with the equity in earnings was $0.1 million and $0.2 million, respectively, for NU (de minimis amounts for CL&P, PSNH and WMECO in both periods).  

Dividends received from the Yankee Companies and the regional transmission companies investments were recorded as a reduction to NU's, including CL&P, PSNH and WMECO, investment.  There was a de minimis amount of dividends received for the three months ended March 31, 2010.  Dividends received were $2.8 million ($1.5 million for CL&P, $0.2 million for PSNH and $0.4 million for WMECO) for the three months ended March 31, 2009.   

H.

Special Deposits and Counterparty Deposits

To the extent NU Enterprises, through Select Energy, requires collateral from counterparties, or the counterparties require collateral from Select Energy, cash is held on deposit by Select Energy or with unaffiliated counterparties and brokerage firms as a part of the total collateral required based on Select Energy's position in transactions with the counterparty.  Select Energy's right to use cash collateral is determined by the terms of the related agreements.  Key factors affecting the unrestricted status of a portion of this cash collateral include the financial standing of Select Energy and of NU as its credit supporter.

28

NU, including CL&P, PSNH, and WMECO, records special deposits and counterparty deposits posted under master netting agreements as an offset to a Derivative asset or liability if the related derivatives are recorded in a net position.  As of March 31, 2010, Select Energy had $9.5 million of collateral posted under master netting agreements and netted against the fair value of the derivatives.  As of December 31, 2009, CL&P and Select Energy had $0.5 million and $2.1 million, respectively, of collateral posted under master netting agreements and netted against the fair value of the derivatives.

Special deposits paid by Select Energy to unaffiliated counterparties and brokerage firms not subject to master netting agreements totaled $33.3 million and $28.1 million as of March 31, 2010 and December 31, 2009, respectively.  These amounts are included in Prepayments and other current assets on the accompanying unaudited condensed consolidated balance sheets.  There were no counterparty deposits for Select Energy as of March 31, 2010 and December 31, 2009.  

NU, CL&P, PSNH and WMECO have established credit policies regarding counterparties to minimize overall credit risk.  These policies require an evaluation of potential counterparties, financial condition, collateral requirements and the use of standardized agreements that allow for the netting of positive and negative exposures associated with a single counterparty.  These evaluations result in established credit limits prior to entering into a contract.  As of March 31, 2010 and December 31, 2009, there were no counterparty deposits for these companies.  

I.

Income Taxes

On March 23, 2010, President Obama signed into law the 2010 Healthcare Act.  The 2010 Healthcare Act was amended by a Reconciliation Bill signed into law on March 30, 2010.  The 2010 Healthcare Act includes a provision that eliminated the tax deductibility of certain PBOP contributions equal to the amount of the federal subsidy received by companies like NU, which sponsor retiree health care benefit plans with a prescription drug benefit that is actuarially equivalent to Medicare Part D.  NU recorded approximately $18 million in charges to Income tax expense on the accompanying unaudited condensed consolidated statement of income for the three months ended March 31, 2010 as a result of the 2010 Healthcare Act.  This represented the loss of previously recognized Accumulated deferred income tax assets.  Since the electric and natural gas distribution companies are cost-of-service and rate regulated, som e of these costs are able to be deferred and recovered through future rates.  As a result, NU recognized approximately $15 million in after-tax deferrals ($24.4 million pre-tax) in Other long-term assets on the accompanying unaudited condensed consolidated balance sheet as of March 31, 2010 with an offset to Amortization of regulatory (liabilities)/assets, net on the accompanying unaudited condensed consolidated statement of income, which reflects the probable recovery in future rates of these previously recognized lost tax benefits.  Therefore, only the net amount of approximately $3 million resulted in an impact to Net income for the three months ended March 31, 2010.  

J.

Other Taxes

Certain excise taxes levied by state or local governments are collected by CL&P and Yankee Gas from their respective customers.  These excise taxes are shown on a gross basis with collections in revenues and payments in expenses.  Gross receipts taxes, franchise taxes and other excise taxes were included in Operating revenues and Taxes other than income taxes on the accompanying unaudited condensed consolidated statements of income as follows:  

	For the Three Months Ended
(Millions of Dollars)	March 31, 2010		March 31, 2009
NU	$	34.2	$	39.0
CL&P		27.3		30.9

Certain sales taxes are also collected by CL&P, WMECO, and Yankee Gas from their respective customers as agents for state and local governments and are recorded on a net basis with no impact on the accompanying unaudited condensed consolidated statements of income.   

K.

Common Shares

The following table provides the amount of NU common shares and the shares of CL&P, PSNH and WMECO common stock authorized and issued and the related par values as of March 31, 2010 and December 31, 2009:

			Shares
			Authorized	Issued
		Per Share Par Value	As of March 31, 2010 and December 31, 2009	As of March 31, 2010	As of December 31, 2009
NU	$	5	225,000,000	195,676,144	195,455,214
CL&P	$	10	24,500,000	6,035,205	6,035,205
PSNH	$	1	100,000,000	301	301
WMECO	$	25	1,072,471	434,653	434,653

As of March 31, 2010 and December 31, 2009, common shares held in treasury by NU were 19,704,756 and 19,708,136, respectively.

L.

Restricted Cash

As of March 31, 2010 and December 31, 2009, PSNH had $11.4 million and $10 million, respectively, of restricted cash held with a trustee related to insurance proceeds received on bondable property, which was included in Prepayments and other current assets on the accompanying unaudited condensed consolidated balance sheets.

29

M.

Supplemental Cash Flow Information

Non-cash investing activities include capital expenditures incurred but not paid as follows:

(Millions of Dollars)	As of March 31, 2010		As of December 31, 2009
NU	$	98.4	$	125.5
CL&P		30.5		48.2
PSNH		45.9		46.5
WMECO		11.8		10.3

The majority of the short-term borrowings of NU, including CL&P, PSNH, and WMECO, have original maturities of three months or less.  Accordingly, borrowings and repayments are shown net on the statement of cash flows.  In December 2008, NU parent borrowed $127 million under its revolving credit agreement that had original maturities in excess of 90 days.  These amounts were repaid in March 2009.  This activity is included in the net activity seen in the statement of cash flows.  For the three month period ended March 31, 2010, NU, CL&P, PSNH, and WMECO had no such borrowings.  

2.

DERIVATIVE INSTRUMENTS

The costs and benefits of derivative contracts that meet the definition of and are designated as "normal purchases or normal sales" (normal) are recognized in Operating expenses or Operating revenues on the accompanying unaudited condensed consolidated statements of income, as applicable, as electricity or natural gas is delivered.  

Derivative contracts that are not recorded as normal under the applicable accounting guidance, are recorded at fair value as current or long-term derivative assets or liabilities.  Changes in fair values of NU Enterprises' derivatives are included in Net income.  For the Regulated companies, including CL&P, PSNH, and Yankee Gas, regulatory assets or liabilities are recorded for the changes in fair values of derivatives, as these contracts are part of current regulated operating costs, or have an allowed recovery mechanism, and management believes that these costs will continue to be recovered from or refunded to customers in cost-of-service, regulated rates.  See below for discussion of "Derivatives not designated as hedges."

CL&P, PSNH, WMECO, and Yankee Gas are exposed to the volatility of the prices of energy and energy-related products in procuring energy supply for their customers.  The costs associated with supplying energy to customers are recoverable through customer rates.  The Company manages the risks associated with the price volatility of energy and energy-related products through the use of derivative contracts, many of which are accounted for as normal (for WMECO all derivative contracts are accounted for as normal) and the use of nonderivative contracts.

CL&P mitigates the risks associated with the price volatility of energy and energy-related products through the use of standard or last resort service contracts, which fix the price of electricity purchased for customers for periods of time ranging from three months to three years and are accounted for as normal.  CL&P has entered into derivatives, including FTR contracts and bilateral basis swaps, to manage the risk of congestion costs associated with its SS and LRS contracts.  As required by regulation, CL&P has also entered into derivative and nonderivative contracts for the purchase of energy and energy-related products and contracts related to capacity.  While the risks managed by these contracts are regional congestion costs and capacity price risks that are not specific to CL&P, Connecticut's electric distribution companies, including CL&P, are required to enter into these contracts.  Manage ment believes any costs or benefits from these contracts are recoverable from or refunded to CL&P's customers, and, therefore any changes in fair value are recorded as Regulatory assets and Regulatory liabilities on the accompanying unaudited condensed consolidated balance sheets.

WMECO mitigates the risks associated with the volatility of the prices of energy and energy-related products in procuring energy supply for its customers through the use of default service contracts, which fix the price of electricity purchased for customers for periods of time ranging from three months to three years and are accounted for as normal.  

PSNH mitigates the risks associated with the volatility of energy prices in procuring energy supply for its customers through its generation facilities and the use of derivative contracts, including energy forward contracts, options and FTRs.  PSNH enters into these contracts in order to stabilize electricity prices for customers.  Management believes any costs or benefits from these contracts are recoverable from or will be refunded to PSNH's customers, and, therefore any changes in fair value are recorded as Regulatory assets and Regulatory liabilities on the accompanying unaudited condensed consolidated balance sheets.

Yankee Gas mitigates the risks associated with supply availability and volatility of natural gas prices through the use of storage facilities and long-term agreements to purchase natural gas supply for customers that include nonderivative contracts and contracts that are accounted for as normal.  Yankee Gas enters into these contracts to meet required demand levels throughout the heating season.  Yankee Gas also manages supply risk through the use of options contracts.  Management believes any costs or benefits from these contracts are recoverable from or refundable to Yankee Gas' customers, and, therefore, any changes in fair value are recorded as Regulatory assets and Regulatory liabilities on the accompanying unaudited condensed consolidated balance sheets.

NU Enterprises, through Select Energy, has one remaining fixed price forward sales contract that is part of its wholesale energy marketing portfolio.  NU Enterprises mitigates the price risk associated with this contract through the use of forward purchase contracts.  NU Enterprises' derivative contracts are accounted for at fair value, and changes in their fair values are recorded in Operating expenses on the accompanying unaudited condensed consolidated statements of income.  

30

NU is also exposed to interest rate risk associated with its long-term debt.  From time to time, various subsidiaries of the Company enter into forward starting interest rate swaps, accounted for as cash flow hedges, to mitigate the risk of changes in interest rates when they expect to issue long-term debt.  NU parent has also entered into an interest rate swap on fixed rate long-term debt in order to manage the balance of fixed and floating rate debt.  This interest rate swap mitigates the interest rate risk associated with the fixed rate long-term debt and is accounted for as a fair value hedge.

The gross fair values of derivative assets and liabilities with the same counterparty are offset and reported as net Derivative assets or Derivative liabilities, with appropriate current and long-term portions, in the accompanying unaudited condensed consolidated balance sheets.  The following tables present the gross fair values of contracts and the net amounts recorded as current or long-term derivative assets or liabilities, by primary underlying risk exposures or purpose:

	As of March 31, 2010
	Derivatives Not Designated as Hedges
(Millions of Dollars)	Commodity and Capacity Contracts Required by Regulation		Commodity Sales Contract and Related Price and Supply Risk Management		Other Commodity Price and Supply Risk Management		Hedging Instruments-Interest Rate Risk Management		Collateral and Netting		Net Amount Recorded as Derivative Asset/(Liability)
Current Derivative Assets:
Level 2:
NU Parent	$	-	$	-	$	-	$	5.0	$	-	$	5.0
Level 3:
NU Enterprises		-		4.3		-		-		-		4.3
CL&P		5.3		-		2.8		-		-		8.1
Total Current Derivative Assets	$	5.3	$	4.3	$	2.8	$	5.0	$	-	$	17.4
Long-Term Derivative Assets:
Level 2:
NU Parent	$	-	$	-	$	-	$	9.4	$	-	$	9.4
Level 3:
NU Enterprises		-		6.5		-		-		-		6.5
CL&P (1)		213.7		-		-		-		(75.9)		137.8
Total Long-Term Derivative Assets	$	213.7	$	6.5	$	-	$	9.4	$	(75.9)	$	153.7
Current Derivative Liabilities:
Level 2:
PSNH	$	-	$	-	$	(25.5)	$	-	$	-	$	(25.5)
Level 3:
NU Enterprises (2)		-		(14.3)		-		-		9.5		(4.8)
CL&P		(13.1)		-		(0.4)		-		-		(13.5)
Yankee Gas		-		-		(0.4)		-		-		(0.4)
Total Current Derivative Liabilities	$	(13.1)	$	(14.3)	$	(26.3)	$	-	$	9.5	$	(44.2)
Long-Term Derivative Liabilities:
Level 2:
PSNH	$	-	$	-	$	(9.7)	$	-	$	-	$	(9.7)
Level 3:
NU Enterprises (1)		-		(39.5)		-		-		0.6		(38.9)
CL&P		(923.0)		-		-		-		-		(923.0)
Yankee Gas		-		-		(0.4)		-		-		(0.4)
Total Long-Term Derivative Liabilities	$	(923.0)	$	(39.5)	$	(10.1)	$	-	$	0.6	$	(972.0)

31

	As of December 31, 2009
	Derivatives Not Designated as Hedges
(Millions of Dollars)	Commodity and Capacity Contracts Required by Regulation		Commodity Sales Contract and Related Price and Supply Risk Management		Other Commodity Price and Supply Risk Management		Hedging Instruments-Interest Rate Risk Management		Collateral and Netting		Net Amount Recorded as Derivative Asset/(Liability)
Current Derivative Assets:
Level 2:
NU Parent	$	-	$	-	$	-	$	6.7	$	-	$	6.7
Level 3:
CL&P		20.1		-		4.5		-		-		24.6
PSNH (3)		-		-		0.4		-		-		0.4
Yankee Gas		-		-		0.1		-		-		0.1
Total Current Derivative Assets	$	20.1	$	-	$	5.0	$	6.7	$	-	$	31.8
Long-Term Derivative Assets:
Level 2:
NU Parent	$	-	$	-	$	-	$	6.5	$	-	$	6.5
Level 3:
CL&P (1)		259.0		-		-		-		(75.8)		183.2
Total Long-Term Derivative Assets	$	259.0	$	-	$	-	$	6.5	$	(75.8)	$	189.7
Current Derivative Liabilities:
Level 2:
PSNH	$	-	$	-	$	(18.8)	$	-	$	-	$	(18.8)
Level 3:
NU Enterprises  (2)		-		(13.0)		-		-		4.3		(8.7)
CL&P (4)		(10.3)		-		-		-		0.5		(9.8)
Yankee Gas		-		-		(0.4)		-		-		(0.4)
Total Current Derivative Liabilities	$	(10.3)	$	(13.0)	$	(19.2)	$	-	$	4.8	$	(37.7)
Long-Term Derivative Liabilities:
Level 2:
PSNH	$	-	$	-	$	(7.6)	$	-	$	-	$	(7.6)
Level 3:
NU Enterprises (1)		-		(41.1)		-		-		6.7		(34.4)
CL&P		(913.3)		-		-		-		-		(913.3)
Yankee Gas		-		-		(0.3)		-		-		(0.3)
Total Long-Term Derivative Liabilities	$	(913.3)	$	(41.1)	$	(7.9)	$	-	$	6.7	$	(955.6)

⁽¹⁾

Amounts in Collateral and Netting represent derivative contracts that are netted against the fair value of the gross derivative asset/liability.  

⁽²⁾

Collateral and Netting amounts as of March 31, 2010 for NU Enterprises current liabilities represent cash collateral posted that is under master netting agreements.  As of December 31, 2009, Collateral and Netting included derivative assets of $2.2 million that are netted against the fair value of derivative liabilities and cash collateral of $2.1 million posted under master netting agreements.

⁽³⁾

On PSNH's accompanying unaudited condensed consolidated balance sheet, the current portion of the net derivative asset is shown in Prepayments and other current assets.

⁽⁴⁾

Collateral and Netting amounts represent cash posted under master netting agreements.

For further information on the fair value of derivative contracts, see Note 1B, "Summary of Significant Accounting Policies - Fair Value Measurements," to the unaudited condensed consolidated financial statements.

The following provides additional information about the derivatives included in the tables above, including volumes and cash flow information.

Derivatives not designated as hedges

NU Enterprises' commodity sales contract and related price and supply risk management:  As of March 31, 2010 and December 31, 2009, NU Enterprises had approximately 0.4 million MWh of supply volumes remaining in its wholesale portfolio when expected sales to an agency that is comprised of municipalities are compared with contracted supply, both of which extend through 2013.

CL&P commodity and capacity contracts required by regulation:  As of March 31, 2010 and December 31, 2009, CL&P had contracts with two IPPs to purchase electricity monthly in amounts aggregating approximately 1.5 million MWh per year through March 2015 under one of these contracts and 0.1 million MWh per year through December 2020 under the second contract.  CL&P also has two capacity-related CfDs to increase energy supply in Connecticut relating to one generating project that has been modified and one generating plant to be built.  The total capacity of these CfDs and two additional CfDs entered into by UI is expected to be approximately 787 MW.  CL&P has an agreement with UI, which is also accounted for as a derivative, under which they will share the

32

costs and benefits of the four CfDs, with 80 percent allocated to CL&P and 20 percent to UI.  The four CfDs obligate the utilities to pay/receive monthly the difference between a set capacity price and the forward capacity market price that the projects receive in the ISO-NE capacity markets for periods of up to 15 years beginning in 2009.  

CL&P, PSNH, and Yankee Gas energy and natural gas price and supply risk management:  As of March 31, 2010 and December 31, 2009, CL&P had 2 million and 2.7 million MWh, respectively, remaining under FTRs that extend through December 2010 and require monthly payments or receipts.  

PSNH has electricity procurement contracts with delivery dates through 2011 to purchase an aggregate amount of 0.9 million and 1 million MWh of power as of March 31, 2010 and December 31, 2009, respectively, that is used to serve customer load and manage price risk of its electricity delivery service obligations.  These contracts are settled monthly.  PSNH also has two energy call options that it received in exchange for assigning its transmission rights in a direct current transmission line.  The options give PSNH the right to purchase 0.4 million and 0.6 million MWh of electricity through December 2010 as of March 31, 2010 and December 31, 2009, respectively.  In addition, PSNH has entered into FTRs to manage the risk of congestion costs associated with its electricity delivery service.  As of March 31, 2010 and December 31, 2009, there were 0.1 million and 0.4 million MWh, respectively, remainin g under FTRs that extend through December 2010 and required monthly payments or receipts.  The purpose of the PSNH derivative contracts is to provide stable rates for customers by mitigating price uncertainties associated with the New England electricity spot market.  

As of March 31, 2010 and December 31, 2009, Yankee Gas had two peaking supply option contracts to purchase up to 17 thousand MMBtu of natural gas on up to 20 days per season to manage natural gas supply price risk related to winter load obligations.  One contract for three thousand MMBtu expires on October 31, 2010 and the other contract for 14 thousand MMBtu expires on April 1, 2012.  Demand fees on these contracts are paid annually and are included in Yankee Gas' PGA clause for recovery.  

The following table presents the realized and unrealized gains/(losses) associated with derivative contracts not designated as hedges:

		Amount of Gain/(Loss) Recognized on Derivative Instrument
Derivatives Not Designated as Hedges	Location of Gain or Loss Recognized on Derivative	For the Three Months Ended March 31, 2010		For the Three Months Ended March 31, 2009
NU Enterprises:		(Millions of Dollars)		(Millions of Dollars)
Commodity sales contract and related   price and supply risk management	Fuel, purchased and net   interchange power	$	(0.2)	$	5.5
Regulated Companies:
CL&P energy and capacity   contracts required by regulation	Regulatory assets/liabilities		(68.7)		(11.1)
Other Commodity price and supply risk  management:
CL&P	Regulatory assets/liabilities		(3.0)		(5.9)
PSNH	Regulatory assets/liabilities		(17.6)		(42.5)
Yankee Gas	Regulatory assets/liabilities		(0.4)		(0.9)

For the Regulated companies, monthly settlement amounts are recorded as receivables or payables and as Operating revenues or Fuel, purchased and net interchange power on the accompanying unaudited condensed consolidated financial statements.  Regulatory assets/liabilities are established with no impact to Net income.

Derivatives designated as hedging instruments  

Interest Rate Risk Management:  To manage the interest rate risk characteristics of NU parent's fixed rate long-term debt, NU parent has a fixed to floating interest rate swap on its $263 million, 7.25 percent fixed rate senior notes maturing on April 1, 2012.  This interest rate swap qualifies and was designated as a fair value hedge and requires semi-annual cash settlements.  The changes in fair value of the swap and the interest component of the hedged long-term debt instrument are recorded in Interest expense on the accompanying unaudited condensed consolidated statements of income.  There was no ineffectiveness recorded for the three months ended March 31, 2010 and 2009.  The cumulative changes in fair values of the swap and the Long-term debt are recorded as a Derivative asset/liability and an adjustment to Long-term debt.  Interest receivable is recorded as a reduction of Interest expense and is included in Prepayments and other current assets.  

For the three months ended March 31, 2010 and 2009, the realized and unrealized gains/(losses) related to changes in fair value of the swap and Long-term debt as well as pre-tax Interest expense, recorded in Net income, were as follows:

	For the Three Months Ended March 31, 2010				For the Three Months Ended March 31, 2009
(Millions of Dollars)	Swap		Hedged Debt		Swap		Hedged Debt
Changes in fair value	$	3.9	$	(3.9)	$	0.5	$	(0.5)
Interest recorded in Net income		-		2.8		-		1.4

33

There were no cash flow hedges outstanding as of or during the three months ended March 31, 2010 and 2009 and no ineffectiveness was recorded during these periods.  From time to time, NU, including CL&P, PSNH and WMECO, enters into forward starting interest rate swap agreements on proposed debt issuances that qualify and are designated as cash flow hedges.  Cash flow hedges are recorded at fair value, and the changes in the fair value of the effective portion of those contracts are recognized in Accumulated other comprehensive loss.  Cash flow hedges impact Net income when hedge ineffectiveness is measured and recorded, when the forecasted transaction being hedged is improbable of occurring or when the transaction is settled.  When a cash flow hedge is terminated, the settlement amount is recorded in Accumulated other comprehensive loss and is amortized into Net income over the term of the underlying debt instrume nt.  

Pre-tax gains/(losses) amortized from Accumulated other comprehensive loss into Interest expense on the accompanying unaudited condensed consolidated statements of income were as follows:

(Millions of Dollars)	For the Three Months Ended March 31, 2010		For the Three Months Ended March 31, 2009
CL&P	$	(0.2)	$	(0.2)
Other		0.1		0.1
NU	$	(0.1)	$	(0.1)

For further information, see Note 5, "Comprehensive Income," to the unaudited condensed consolidated financial statements.

Credit Risk

Certain derivative contracts that are accounted for at fair value, including PSNH's electricity procurement contracts, CL&P's bilateral agreements and NU Enterprises' electricity sourcing contracts, contain credit risk contingent features.  These features require these companies or, in NU Enterprises' case, NU parent, to maintain investment grade credit ratings from the major rating agencies and to post cash or standby LOCs as collateral for contracts in a net liability position over specified credit limits.  NU parent provides standby LOCs under its revolving credit agreement for NU subsidiaries to post with counterparties.  The following summarizes the fair value of derivative contracts that are in a liability position and subject to credit risk contingent features and the fair value of cash collateral and standby LOCs posted with counterparties as of March 31, 2010 and December 31, 2009:

	As of March 31, 2010
(Millions of Dollars)	Fair Value Subject to Credit Risk Contingent Features		Cash Collateral Posted		Standby LOCs Posted
PSNH	$	(35.2)	$	-	$	34.0
NU Enterprises		(26.1)		9.5		-
NU	$	(61.3)	$	9.5	$	34.0

	As of December 31, 2009
(Millions of Dollars)	Fair Value Subject to Credit Risk Contingent Features		Cash Collateral Posted		Standby LOCs Posted
PSNH	$	(26.4)	$	-	$	25.0
NU Enterprises		(20.0)		2.1		-
NU	$	(46.4)	$	2.1	$	25.0

Additional collateral is required to be posted by NU Enterprises, CL&P or PSNH, respectively, if NU parent's, CL&P's or PSNH's respective unsecured debt credit ratings are downgraded below investment grade.  As of March 31, 2010, no additional cash collateral would have been required to be posted if credit ratings had been downgraded below investment grade.  However, if PSNH's or NU parent's senior unsecured debt had been downgraded to below investment grade, additional standby LOCs in the amount of $6.5 million and $17 million would have been required to be posted on derivative contracts for PSNH and Select Energy, respectively.  As of December 31, 2009, no additional cash collateral would have been required to be posted if credit ratings had been downgraded below investment grade.  However, if PSNH's or NU parent's senior unsecured debt had been downgraded to below investment grade, additi onal standby LOCs in the amount of $1.8 million and $17.8 million would have been required to be posted on derivative contracts for PSNH and Select Energy, respectively.

For further information, see Note 1H, "Summary of Significant Accounting Policies - Special Deposits and Counterparty Deposits," to the unaudited condensed consolidated financial statements.   

Fair Value Measurements of Derivative Instruments:  

Valuation of Derivative Instruments:  Derivative contracts classified as Level 2 in the fair value hierarchy include Other Commodity Price and Supply Risk Management Contracts and Interest Rate Risk Management Contracts.  Other Commodity Price and Supply Risk Management Contracts include PSNH forward contracts to purchase energy for periods for which prices are quoted in an active market.  Prices are obtained from broker quotes and based on actual market activity.  The contracts are valued using the mid-point of the bid-ask spread.  Valuations of these contracts also incorporate discount rates using the yield curve approach.  Interest Rate Risk

34

Management contracts represent interest rate swap agreements and are valued using a market approach provided by the swap counterparty using a discounted cash flow approach utilizing forward interest rate curves.

The derivative contracts classified as Level 3 in the tables below include NU Enterprise's Sales Contract and Related Price and Supply Risk Management contracts, the Regulated companies’ Commodity and Capacity Contracts Required by Regulation (including CL&P's CfDs and contracts with certain IPPs), and Other Commodity Price and Supply Risk Management contracts (PSNH and Yankee Gas physical options, and CL&P and PSNH FTRs.)  For Commodity and Capacity Contracts Required by Regulation and NU Enterprises’ Commodity Sales contract, fair value is modeled using income techniques such as discounted cash flow approaches adjusted for assumptions relating to exit price.  Significant observable inputs for valuations of these contracts include energy and energy-related product prices for which quoted prices in an active market exist.  Significant unobservable inputs used in the valuations of these contracts include e nergy and energy-related product prices for future years for long-dated derivative contracts and future contract quantities under requirements and supplemental sales contracts.  Discounted cash flow valuations incorporate estimates of premiums or discounts that would be required by a market participant to arrive at an exit price, using available historical market transaction information.  Valuations of derivative contracts include assumptions regarding the timing and likelihood of scheduled payments and also reflect nonperformance risk, including credit, using the default probability approach based on the counterparty's credit rating for assets and the company’s credit rating for liabilities.  

Other Commodity Price and Supply Risk Management contracts classified as Level 3 in the tables below are valued using income approaches including a Black-Scholes option pricing model.  Observable inputs used in valuing options include prices for energy and energy-related products for years for which quoted prices in an active market exist.  Unobservable inputs included in the valuation of options contracts include market volatilities related to future energy prices and the estimated likelihood that the option will be exercised.  FTRs are valued using broker quotes based on prices in an inactive market.

Valuations using significant unobservable inputs: The following tables present changes for the three months ended March 31, 2010 and 2009 in the Level 3 category of derivative assets and derivative liabilities measured at fair value on a recurring basis.  The derivative assets and liabilities are presented on a net basis.  The Company classifies assets and liabilities in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model.  In addition to these unobservable inputs, the valuation models for Level 3 assets and liabilities typically also rely on a number of inputs that are observable either directly or indirectly.  Thus the gains and losses presented below include changes in fair value that are attributable to both observable and unobservable inputs.  There were no transfers into or out of Level 3 assets and liabilities for the three months ended March 31, 2010 or 2009:

	For the Three Months Ended March 31, 2010
	NU
(Millions of Dollars)	Commodity and Capacity Contracts Required By Regulation		Commodity Sales Contracts and Related Price and Supply Risk Management		Other Commodity Price and Supply Risk Management		Total Level 3
Derivatives, Net:
Fair value at beginning of period	$	(720.3)	$	(45.2)	$	4.3	$	(761.2)
Net realized/unrealized losses included in:
Net income (1)		-		(0.2)		-		(0.2)
Regulatory assets/liabilities		(68.7)		-		(3.6)		(72.3)
Purchases, issuances and settlements		(3.9)		2.8		0.9		(0.2)
Fair value at end of period	$	(792.9)	$	(42.6)	$	1.6	$	(833.9)
Period change in unrealized losses included   in Net income relating to items held at end   of period	$	-	$	(0.6)	$	-	$	(0.6)

35

	For the Three Months Ended March 31, 2010
	CL&P						PSNH
(Millions of Dollars)	Commodity and Capacity Contracts Required By Regulation		Other Commodity Price and Supply Risk Management		Total Level 3		Other Commodity Price and Supply Risk Management
Derivatives, Net:
Fair value at beginning of period	$	(720.3)	$	4.5	$	(715.8)	$	0.4
Net realized/unrealized losses included in:
Regulatory assets/liabilities		(68.7)		(3.0)		(71.7)		(0.2)
Purchases, issuances and settlements		(3.9)		0.9		(3.0)		(0.2)
Fair value at end of period	$	(792.9)	$	2.4	$	(790.5)	$	-

	For the Three Months Ended March 31, 2009
(Millions of Dollars)	NU		CL&P		PSNH
Derivatives, Net:
Fair value at beginning of period	$	(669.2)	$	(611.1)	$	4.1
Net realized/unrealized gains/(losses) included in:
Net income (1)		5.5		-		-
Regulatory assets/liabilities		(20.6)		(17.0)		(2.7)
Purchases, issuances and settlements		4.0		(5.2)		-
Fair value at end of period	$	(680.3)	$	(633.3)	$	1.4
Period change in unrealized gains included in Net   income relating to items held at end of period	$	5.3	$	-	$	-

⁽¹⁾

Realized and unrealized gains and losses on derivatives included in Net Income relate to the remaining NU Enterprises' marketing contracts and are reported in Fuel, purchased and net interchange power on the accompanying unaudited condensed consolidated statements of income.  

3.

PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

NUSCO, a subsidiary of NU, sponsors the Pension Plan, a single uniform noncontributory defined benefit retirement plan, which is subject to the provisions of the Employee Retirement Income Security Act.  The Pension Plan covers nonbargaining unit employees (and bargaining unit employees, as negotiated) of NU, including CL&P, PSNH, and WMECO, hired before 2006 (or as negotiated, for bargaining unit employees).  On behalf of NU's retirees, NUSCO also sponsors plans that provide certain retiree health care benefits, primarily medical and dental, and life insurance benefits through a PBOP Plan.  In addition, NU maintains a SERP, which provides benefits to eligible participants who are officers of NU.  This plan primarily provides benefits that would have been provided to these employees under the Pension Plan if certain Internal Revenue Code limitations were not imposed.

The components of net periodic expense/(income) for the Pension Plan, PBOP Plan and SERP for the three months ended March 31, 2010 and 2009 are as follows:

	For the Three Months Ended March 31,
NU	Pension Benefits				PBOP Benefits				SERP Benefits
(Millions of Dollars)	2010		2009		2010		2009		2010		2009
Service cost	$	13.0	$	11.3	$	2.2	$	1.8	$	0.2	$	0.2
Interest cost		37.4		38.5		6.7		7.3		0.6		0.6
Expected return on plan assets		(45.6)		(47.4)		(5.4)		(5.1)		-		-
Net transition obligation cost		-		0.1		2.9		2.9		-		-
Prior service cost/(credit)		2.5		2.5		(0.1)		(0.1)		-		-
Actuarial loss		12.6		5.1		4.0		2.5		0.2		0.1
Total - net periodic expense	$	19.9	$	10.1	$	10.3	$	9.3	$	1.0	$	0.9
CL&P - net periodic expense/(income)	$	2.0	$	(1.4)	$	4.2	$	4.0	$	0.1	$	0.1
PSNH - net periodic expense	$	7.2	$	5.8	$	1.9	$	1.8	$	0.1	$	0.1
WMECO - net periodic (income)/expense	$	*	$	(0.7)	$	0.8	$	0.7	$	*	$	*

*A de minimis amount of net periodic expense was recorded for WMECO.

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Not included in the Pension Plan, PBOP Plan and SERP amounts above for CL&P, PSNH and WMECO are related intercompany allocations as follows:

	For the Three Months Ended March 31,
	CL&P				PSNH				WMECO
(Millions of Dollars)	2010		2009		2010		2009		2010		2009
Pension Benefits	$	5.6	$	3.7	$	1.3	$	0.8	$	1.0	$	0.6
PBOP Benefits		1.9		1.7		0.5		0.4		0.3		0.3
SERP Benefits		0.5		0.5		0.1		0.1		0.1		0.1

A portion of the pension amounts is capitalized related to employees who are working on capital projects.  Amounts capitalized, including intercompany allocations, for NU, CL&P, PSNH and WMECO were as follows:  

	For the Three Months Ended March 31,
(Millions of Dollars)	2010		2009
NU	$	4.4	$	1.5
CL&P		1.7		*
PSNH		2.0		1.4
WMECO		0.2		(0.2)

*A de minimis portion of the pension amounts was capitalized for CL&P.

The amounts for the three months ended March 31, 2009 for CL&P and WMECO offset capital costs, as pension income was recorded related to these capital projects.  

4.

COMMITMENTS AND CONTINGENCIES

A.

Environmental Matters (HWP, PSNH)

HWP:  HWP is a subsidiary of NU that remains in the process of evaluating additional potential remediation requirements at a river site in Massachusetts containing tar deposits associated with a MGP site which it sold to HG&E, a municipal electric utility, in 1902.  MGP sites are sites where the process of producing manufactured gas from coal created certain byproducts that may pose a risk to human health and the environment.  HWP is at least partially responsible for this site, and has already conducted substantial investigative and remediation activities.  HWP first established a reserve for this site in 1994.  

The MA DEP issued a letter in 2008 to HWP and HG&E, which share responsibility for the site, providing conditional authorization for additional investigatory and risk characterization activities and providing detailed comments on HWP's 2007 reports and proposals for further investigations.  The MA DEP also indicated that further removal of tar in certain areas was necessary.  This letter represented guidance rather than a mandate from the MA DEP.  HWP developed and implemented site characterization studies to further delineate tar deposits in conformity with the MA DEP's guidance letter.  On April 5, 2010, HWP delivered a report to the MA DEP describing the results to date of its site investigation studies and testing.  These matters are subject to ongoing discussions with the MA DEP and HG&E and are subject to change in the future.

Pre-tax charges of $1.1 million and $3 million were recorded in 2009 and 2008, respectively, to reflect the estimated costs of tar delineation and site characterization studies.  For the three months ended March 31, 2010, a pre-tax charge of $1 million was recorded to reflect the estimated remaining costs to complete these studies and analyze and substantiate them for the MA DEP.  The cumulative expense recorded to the reserve for this environmental matter through March 31, 2010 was approximately $17.9 million, of which $16.3 million had been spent, leaving approximately $1.6 million in the reserve as of March 31, 2010, representing estimated costs for HWP to substantiate its studies and conduct certain soft tar remediation.  At this time, management believes that the $1.6 million remaining in the reserve is at the low end of a range of probable costs for HWP and additional costs cannot be reasonably estimated at this time .

There are many outcomes that could affect management's estimates and require an increase to the reserve, which would be reflected as a charge to pre-tax Net income.  However, management cannot reasonably estimate potential additional investigation or remediation costs because they will depend on, among other things, the nature, extent and timing of additional investigation and remediation that may be required by the MA DEP and could be material to the financial statements, although management does not believe that a material increase to the reserve is probable.  HWP's share of the costs related to this site is not recoverable from customers.  

PSNH:  MGP sites comprise the largest portion of PSNH's environmental liabilities.  PSNH has conducted substantial investigative activities and evaluated remediation requirements in the Ashuelot River and Mill Creek in Keene, New Hampshire, which contains coal tar deposits.  

For the three months ended March 31, 2010, a deferral of $7.5 million was recorded to reflect estimated remediation activities approved by the New Hampshire Department of Environmental Services and expected to be performed in 2010 and 2011.  The cumulative expense recorded to the reserve for this environmental matter through March 31, 2010 was approximately $13.6 million, of which $6 million had been spent, leaving approximately $7.6 million in the reserve as of March 31, 2010.  The $7.6 million remaining in the reserve is management's best estimate to complete the remediation activities.  

37

The $7.5 million deferral was recorded in Other long-term liabilities with an offset recorded to Regulatory assets on the accompanying unaudited condensed consolidated balance sheet because PSNH has a regulatory rate recovery mechanism for environmental costs.  Management believes these costs are probable of recovery in future cost-of-service regulated rates.

B.

Guarantees and Indemnifications

NU parent provides credit assurances on behalf of its subsidiaries, including CL&P, PSNH and WMECO, in the form of guarantees and LOCs in the normal course of business.  NU has also provided guarantees and various indemnifications on behalf of external parties as a result of the sale of SESI, formerly a subsidiary of NU Enterprises.  The aggregate fair value amount recorded for these guarantees and indemnifications since the sale of SESI totaled $0.3 million.  Other indemnifications in connection with the sale of SESI include the completeness and accuracy of information provided, compliance with laws, and various claims, specific indemnifications for estimated costs to complete or modify specific projects, indemnifications to lenders for payment of shortfalls in the event of early termination of government contracts, and surety bonds covering certain projects.  The maximum exposure on these items is ei ther not specified or not material, and no amounts are recorded as liabilities.

In addition, NU parent provided guarantees and various indemnifications on behalf of external parties as a result of the sales of NU Enterprises' former retail marketing business and competitive generation business.  These included indemnifications for compliance with tax and environmental laws, and various claims for which the maximum exposure was not specified in the sale agreements.

Management does not anticipate a material impact to net income to result from these various guarantees and indemnifications.  The following table summarizes the NU, including CL&P, PSNH, and WMECO, maximum exposure as of March 31, 2010, in accordance with guidance on guarantor's accounting and disclosure requirements for guarantees and expiration dates:  

Company	Description	Maximum Exposure (in millions)		Expiration Date(s)
Subsidiary:
Various	Surety bonds	$13.4		July 2010 - June 2011 (1)
PSNH and Select Energy	Letters of credit	$49.6		June - November 2010
RRR and NUSCO	Lease payments for real estate and vehicles	$11.6		Through 2024
Boulos	Surety bonds covering ongoing projects	$26.2		Through project completion
NGS	Performance guarantee and insurance bonds	$18.6	(2)	(2)
Select Energy	Performance guarantees for wholesale contracts	$74.5	(3)	2013

(1)

Surety bond expiration dates reflect bond termination dates, the majority of which will be renewed or extended.  

(2)

Included in the maximum exposure is $17.5 million related to a performance guarantee of NGS obligations for which no maximum exposure is specified in the agreement.  The maximum exposure was calculated as of March 31, 2010 based on limits of NGS's liability contained in the underlying service contract and assumes that NGS will perform under that contract through its expiration in 2020.  The remaining $1.1 million of maximum exposure relates to insurance bonds with no expiration date that are billed annually on their anniversary date.  

(3)

Maximum exposure is as of March 31, 2010, assuming purchase contracts guaranteed have no value; however, actual exposures vary with underlying commodity prices.  

CL&P, PSNH and WMECO have no guarantees of the performance of third parties.  

Many of the underlying contracts that NU parent guarantees, as well as certain surety bonds, contain credit ratings triggers that would require NU parent to post collateral in the event that NU's unsecured debt credit ratings are downgraded below investment grade.  

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5.

COMPREHENSIVE INCOME

Total comprehensive income, which includes all comprehensive income/(loss) items, net of tax and by category, for the three months ended March 31, 2010 and 2009 is as follows:

	Three Months Ended March 31,
	2010		2009
(Millions of Dollars)	NU		NU
Net income	$	87.6	$	99.1
Other comprehensive income items, net of tax:
Qualified cash flow hedging instruments (1)		-		-
Changes in unrealized gains on other securities (2)		0.2		-
Change in pension, SERP and PBOP benefit plans		0.5		0.2
Other comprehensive income items		0.7		0.2
Total comprehensive income		88.3		99.3
Comprehensive income attributable to noncontrolling interest		1.4		1.4
Comprehensive income attributable to controlling interest	$	86.9	$	97.9

	Three Months Ended March 31, 2010						Three Months Ended March 31, 2009
(Millions of Dollars)	CL&P		PSNH		WMECO		CL&P		PSNH		WMECO
Net income	$	48.4	$	15.8	$	5.7	$	53.1	$	17.5	$	6.1
Other comprehensive income items, net of tax:
Qualified cash flow hedging instruments (1)		0.1		-		-		0.1		-		-
Other comprehensive income items		0.1		-		-		0.1		-		-
Total comprehensive income	$	48.5	$	15.8	$	5.7	$	53.2	$	17.5	$	6.1

⁽¹⁾

Hedged transactions impacting Net income in the tables above represent amounts that were reclassified from Accumulated other comprehensive loss into Net income in connection with the settlement of interest rate swap agreements and the amortization of the effects of interest rate hedges.  As of March 31, 2010, the balance included in Accumulated other comprehensive loss related to hedging activities was $4.4 million, $3.1 million, $0.7 million, and a de minimis amount for NU, CL&P, PSNH and WMECO, respectively.  These amounts were $4.4 million, $3.2 million, $0.7 million, and a de minimis amount as of December 31, 2009 for NU, CL&P, PSNH and WMECO, respectively.

⁽²⁾

Represents changes in unrealized gains/(losses) on securities held in the NU supplemental benefit trust.  For further information, see Note 9, "Marketable Securities," to the unaudited condensed consolidated financial statements.  

There were no forward starting interest rate swaps entered into for the three months ended March 31, 2010 or March 31, 2009.  For NU, it is estimated that a charge of $0.2 million will be reclassified from Accumulated other comprehensive loss as a decrease to Net income over the next 12 months as a result of amortization of interest rate swap agreements, which have been settled.  Included in this amount are estimated charges of $0.4 million and $0.1 million for CL&P and PSNH, respectively, and a benefit of $0.1 million for WMECO.  As of March 31, 2010, it is estimated that a pre-tax amount of $0.7 million included in the Accumulated other comprehensive loss balance will be reclassified as a decrease to Net income over the next 12 months related to Pension Plan, SERP and PBOP Plan benefits adjustments for NU.

6.

EARNINGS PER SHARE (NU)

EPS is computed based upon the monthly weighted average number of common shares outstanding, excluding unallocated ESOP shares, during each period.  Diluted EPS is computed on the basis of the monthly weighted average number of common shares outstanding plus the potential dilutive effect if certain securities are converted into common shares.  The computation of diluted EPS excludes the effect of the potential exercise of share awards when the average market price of the common shares is lower than the exercise price of the related awards during the period.  These outstanding share awards are not included in the computation of diluted EPS because the effect would have been antidilutive.  For the three month period ended March 31, 2010, there were 6,311 share awards excluded from the computation as these awards were antidilutive.  There were no antidilutive share awards outstanding for the three month period ended March 31, 2009.  

The following table sets forth the components of basic and fully diluted EPS:

	For the Three Months Ended March 31,
(Millions of Dollars, except for share information)	2010		2009
Net income attributable to controlling interest	$	86.2	$	97.7
Basic weighted average common shares outstanding		176,349,762		162,340,475
Dilutive effect		187,710		584,692
Fully diluted weighted average common shares outstanding		176,537,472		162,925,167
Basic and fully diluted EPS	$	0.49	$	0.60

RSUs and performance shares are included in basic common shares outstanding as of the date that all necessary vesting conditions have been satisfied.  The dilutive effect of outstanding RSUs and performance shares for which common shares have not been issued

39

is calculated using the treasury stock method.  Assumed proceeds of the units under the treasury stock method consist of the remaining compensation cost to be recognized and a theoretical tax benefit.  The theoretical tax benefit is calculated as the tax impact of the intrinsic value of the units (the difference between the market value of the units, using the average market price during the period, and the grant date market value).  

The dilutive effect of stock options is also calculated using the treasury stock method.  Assumed proceeds for stock options consist of remaining compensation cost to be recognized, cash proceeds that would be received upon exercise, and a theoretical tax benefit.  The theoretical tax benefit is calculated as the tax impact of the intrinsic value of the stock options (the difference between the market value of the average stock options outstanding for the period, using the average market price during the period, and the grant price).  

Allocated ESOP shares are included in basic common shares outstanding in the above table.  

7.

LONG-TERM DEBT (WMECO)

On March 8, 2010, WMECO issued $95 million of Series E senior unsecured notes with a coupon rate of 5.1 percent and a maturity date of March 1, 2020.  The proceeds of these notes were used to repay short-term borrowings incurred in the ordinary course of business and to fund WMECO’s ongoing capital investment programs.  

The indenture under which the notes were issued requires WMECO to comply with certain covenants as are customarily included in such indentures.  WMECO was in compliance with these covenants as of March 31, 2010.

8.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each of the following financial instruments:

Preferred Stock, Long-Term Debt and Rate Reduction Bonds:  The fair value of CL&P's preferred stock is based upon pricing models that incorporate interest rates and other market factors, valuations or trades of similar securities and cash flow projections.  The fair value of fixed-rate long-term debt securities and RRBs is based upon pricing models that incorporate quoted market prices for those issues or similar issues adjusted for market conditions, credit ratings of the respective companies and treasury benchmark yields.  Adjustable rate securities are assumed to have a fair value equal to their carrying value.  Carrying amounts and estimated fair values are as follows:

	As of March 31, 2010				As of December 31, 2009
	NU				NU
(Millions of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Preferred stock not subject   to mandatory redemption	$	116.2	$	93.1	$	116.2	$	86.8
Long-term debt -
First mortgage bonds		2,657.7		2,844.2		2,657.7		2,713.5
Other long-term debt		1,988.7		2,047.4		1,893.6		1,938.0
Rate reduction bonds		375.9		416.9		442.4		487.3

		As of March 31, 2010
		CL&P				PSNH					WMECO
(Millions of Dollars)		Carrying Amount		Fair Value		Carrying Amount			Fair Value		Carrying Amount		Fair Value
Preferred stock not subject   to mandatory redemption	$		116.2	$	93.1		$	- -	$	- -	$	- -	$	- -
Long-term debt -
First mortgage bonds			1,919.8		2,066.2			430.0		448.4		-		-
Other long-term debt			667.5		671.4			407.3		409.8		400.9		414.2
Rate reduction bonds			144.9		166.5			176.2		190.8		54.8		59.6

40

		As of December 31, 2009
		CL&P				PSNH					WMECO
(Millions of Dollars)		Carrying Amount		Fair Value		Carrying Amount			Fair Value		Carrying Amount		Fair Value
Preferred stock not subject   to mandatory redemption	$		116.2	$	86.8		$	- -	$	- -	$	- -	$	- -
Long-term debt -
First mortgage bonds			1,919.8		1,960.6			430.0		425.4		-		-
Other long-term debt			667.4		673.4			407.3		408.6		305.9		304.9
Rate reduction bonds			195.6		220.1			188.1		203.5		58.7		63.7

The NU other long-term debt includes $300.7 million and $300.6 million of fees and interest due for spent nuclear fuel disposal costs as of March 31, 2010 and December 31, 2009, respectively.  CL&P's portion of this obligation is $243.6 million and $243.5 million as of March 31, 2010 and December 31, 2009, respectively.  WMECO's portion of this obligation is $57.1 million as of March 31, 2010 and December 31, 2009.

Derivative Instruments:  NU, including CL&P and PSNH, holds various derivative instruments that are carried at fair value.  For further information, see Note 2, "Derivative Instruments," to the unaudited condensed consolidated financial statements.  

Other Financial Instruments:  Investments in marketable securities are carried at fair value on the accompanying unaudited condensed consolidated balance sheets.  For further information, see Note 1B, "Summary of Significant Accounting Policies - Fair Value Measurements," and Note 9, "Marketable Securities," to the unaudited condensed consolidated financial statements.

NU parent holds a long-term government receivable related to SESI.  The carrying value of the receivable was $8.8 million as of March 31, 2010 and is included in Other long-term assets on the accompanying unaudited condensed consolidated balance sheets.  The fair value of this receivable was $10.7 million and $10.6 million as of March 31, 2010 and December 31, 2009, respectively, and was determined based on discounted cash flows using a seven-year Treasury rate to match the weighted average life of the anticipated cash flow stream.  

The carrying value of other financial instruments included in current assets and current liabilities, including cash and cash equivalents and special deposits, approximates their fair value due to the short-term nature of these instruments.

9.

MARKETABLE SECURITIES (NU, WMECO)

The Company elected to record exchange traded mutual funds purchased during 2009 in the NU supplemental benefit trust at fair value in order to reflect the economic effect of changes in fair value of all newly purchased equity securities in Net income.  These equity securities, classified as Level 1 in the fair value hierarchy, totaled $37 million and $35.3 million as of March 31, 2010 and December 31, 2009, respectively.  Net gains on these securities of $1.7 million for the three months ended March 31, 2010 were recorded in Other income, net on the accompanying unaudited condensed consolidated statement of income.  Dividend income is recorded when dividends are declared and are recorded in Other income, net on the accompanying unaudited condensed consolidated statements of income.  All other marketable securities are accounted for as available-for-sale.  

Available-for-Sale Securities:  The following is a summary by security type of NU's available-for-sale securities held in the NU supplemental benefit trust and WMECO's spent nuclear fuel trust.  These securities are recorded at fair value and included in current and long-term portions of marketable securities on the accompanying unaudited condensed consolidated balance sheets.

	As of March 31, 2010
(Millions of Dollars)	Amortized Cost		Pre-Tax Gross Unrealized Gains (1)		Pre-Tax Gross Unrealized Losses (1)		Fair Value
NU supplemental benefit trust
U.S. government issued debt securities   (agency and treasury)	$	11.2	$	0.3	$	(0.2)	$	11.3
Corporate debt securities		8.4		0.4		-		8.8
Municipal bonds		0.3		-		-		0.3
Asset backed debt securities		5.5		0.3		-		5.8
Money market funds and other		3.7		-		-		3.7
Total NU supplemental benefit trust	$	29.1	$	1.0	$	(0.2)	$	29.9

41

	As of March 31, 2010
(Millions of Dollars)	Amortized Cost		Pre-Tax Gross Unrealized Gains (1)		Pre-Tax Gross Unrealized Losses (1)		Fair Value
WMECO spent nuclear fuel trust
U.S. government issued debt securities   (agency and treasury)	$	12.0	$	-	$	-	$	12.0
Corporate debt securities		15.5		-		(0.1)		15.4
Municipal bonds		10.5		-		-		10.5
Asset backed debt securities		0.8		-		(0.1)		0.7
Money market funds and other		18.2		-		-		18.2
Total WMECO spent nuclear fuel trust	$	57.0	$	-	$	(0.2)	$	56.8
Total NU	$	86.1	$	1.0	$	(0.4)	$	86.7

	As of December 31, 2009
(Millions of Dollars)	Amortized Cost		Pre-Tax Gross Unrealized Gains (1)		Pre-Tax Gross Unrealized Losses (1)		Fair Value
NU supplemental benefit trust
U.S. government issued debt securities   (agency and treasury)	$	12.8	$	0.3	$	(0.2)	$	12.9
Corporate debt securities		7.4		0.4		(0.1)		7.7
Municipal bonds		0.2		-		-		0.2
Asset backed debt securities		5.2		0.1		(0.1)		5.2
Money market funds and other		3.0		-		-		3.0
Total NU supplemental benefit trust	$	28.6	$	0.8	$	(0.4)	$	29.0

WMECO spent nuclear fuel trust
U.S. government issued debt securities   (agency and treasury)	$	17.0	$	- -	$	- -	$	17.0
Corporate debt securities		17.4		0.1		(0.1)		17.4
Municipal bonds		10.6		-		-		10.6
Asset backed debt securities		1.1		-		(0.2)		0.9
Money market funds and other		10.9		-		-		10.9
Total WMECO spent nuclear fuel trust	$	57.0	$	0.1	$	(0.3)	$	56.8
Total NU	$	85.6	$	0.9	$	(0.7)	$	85.8

⁽¹⁾

Unrealized gains and losses on debt securities for the NU supplemental benefit trust and WMECO spent nuclear fuel trust are recorded in Accumulated other comprehensive loss and Other long-term assets, respectively, on the accompanying unaudited condensed consolidated balance sheets.  For information related to the change in unrealized gains and losses for the NU supplemental benefit trust included in Accumulated other comprehensive loss, see Note 5, "Comprehensive Income," to the unaudited condensed consolidated financial statements.

Unrealized Losses and Other-than-Temporary Impairment:  Gross unrealized losses and fair values of debt securities that have been in a continuous unrealized loss position for less than 12 months and 12 months or greater are as follows:

	As of March 31, 2010
	Less than 12 Months				12 Months or Greater				Total
(Millions of Dollars)	Fair Value		Pre-Tax Gross Unrealized Losses		Fair Value		Pre-Tax Gross Unrealized Losses		Fair Value		Pre-Tax Gross Unrealized Losses
NU supplemental benefit trust					&n bsp;
U.S. government issued debt  securities (agency and   treasury)	$	5.6	$	(0.2)	$	-	$	-	$	5.6	$	(0.2)
Total NU supplemental benefit  trust	$	5.6	$	(0.2)	$	-	$	-	$	5.6	$	(0.2)
WMECO spent nuclear   fuel trust
Corporate debt securities	$	-	$	-	$	0.2	$	(0.1)	$	0.2	$	(0.1)
Asset backed debt securities		-		-		0.4		(0.1)		0.4		(0.1)
Total WMECO spent nuclear   fuel trust	$	-	$	-	$	0.6	$	(0.2)	$	0.6	$	(0.2)
Total NU	$	5.6	$	(0.2)	$	0.6	$	(0.2)	$	6.2	$	(0.4)

42

	As of December 31, 2009
	Less than 12 Months				12 Months or Greater				Total
(Millions of Dollars)	Fair Value		Pre-Tax Gross Unrealized Losses		Fair Value		Pre-Tax Gross Unrealized Losses		Fair Value		Pre-Tax Gross Unrealized Losses
NU supplemental benefit trust
U.S. government issued debt  securities (agency and   treasury)	$	6.6	$	(0.1)	$	0.7	$	(0.1)	$	7.3	$	(0.2)
Corporate debt securities		-		-		0.4		(0.1)		0.4		(0.1)
Asset backed debt securities		-		-		1.2		(0.1)		1.2		(0.1)
Total NU supplemental benefit  trust	$	6.6	$	(0.1)	$	2.3	$	(0.3)	$	8.9	$	(0.4)
WMECO spent nuclear   fuel trust
Corporate debt securities	$	-	$	-	$	0.2	$	(0.1)	$	0.2	$	(0.1)
Asset backed debt securities		-		-		0.5		(0.2)		0.5		(0.2)
Total WMECO spent nuclear   fuel trust	$	- -	$	- -	$	0.7	$	(0.3)	$	0.7	$	(0.3)
Total NU	$	6.6	$	(0.1)	$	3.0	$	(0.6)	$	9.6	$	(0.7)

As of March 31, 2010 and December 31, 2009, there were no debt securities that the Company intends to sell or that management believes the Company will more likely than not be required to sell before recovery of amortized cost.  Credit losses for the NU supplemental benefit trust were de minimis for the three months ended March 31, 2010 and were recorded in Other income, net on the accompanying unaudited condensed consolidated income statement.  There were no credit losses for the WMECO spent nuclear fuel trust for the three months ended March 31, 2010.  Inception to date credit losses were de minimis for the NU supplemental benefit trust and $0.7 million for the WMECO spent nuclear fuel trust.  Factors considered in determining whether a credit loss exists include the duration and severity of the impairment, adverse conditions specifically affecting the issuer, and the payment history, ratings and rating changes of the security.  For asset backed securities, underlying collateral and expected future cash flows are also evaluated.  All of the corporate and asset-backed securities held in the NU supplemental benefit trust are rated above investment grade.  All but two of the securities in the WMECO spent nuclear fuel trust are rated above investment grade and credit losses have been recorded for those securities that are below investment grade.

For information related to the change in unrealized gains included in Accumulated other comprehensive loss, see Note 5, "Comprehensive Income," to the unaudited condensed consolidated financial statements.

Contractual Maturities:  As of March 31, 2010, the contractual maturities of available-for-sale debt securities are as follows:

		NU			WMECO
(Millions of Dollars)		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than one year	$	45.0	$	45.0	$	41.6	$	41.6
One to five years		12.2		12.4		4.7		4.7
Six to ten years		7.5		7.8		1.2		1.2
Greater than ten years		21.4		21.5		9.5		9.3
Total debt securities	$	86.1	$	86.7	$	57.0	$	56.8

Sales of Securities:  For the three months ended March 31, 2010 and 2009, realized gains and losses recognized on the sale of available-for-sale securities are as follows:

	Three Months Ended March 31, 2010						Three Months Ended March 31, 2009
(Millions of Dollars)		Realized Gains		Realized Losses		Net Realized Gains		Realized Gains		Realized Losses		Net Realized Losses
NU	$	0.1	$	-	$	0.1	$	0.6	$	(1.0)	$	(0.4)
WMECO		-		-		-		-		-		-

Realized gains and losses on available-for-sale-securities are recorded in Other income, net for the NU supplemental benefit trust and in Other long-term assets for the WMECO spent nuclear fuel trust.  NU utilizes the specific identification basis method for the NU supplemental benefit trust securities and the average cost basis method for the WMECO spent nuclear fuel trust to compute the realized gains and losses on the sale of available-for-sale securities.  Proceeds from the sale of these securities, including proceeds from short-term investments, totaled $21.3 million and $52.9 million for the three months ended March 31, 2010 and 2009, respectively.  WMECO's portion of these proceeds totaled $11.1 million and $35.7 million for the three months ended March 31, 2010 and 2009, respectively.  Proceeds from the sales of securities are used to purchase new securities.

43

Fair Value Measurements:  The following table presents the marketable securities recorded at fair value on a recurring basis by the level in which they are classified within the fair value hierarchy:

	NU				WMECO
	As of March 31, 2010		As of December 31, 2009		As of March 31, 2010		As of December 31, 2009
Level 1:
Exchange Traded Funds	$	33.7	$	32.0	$	-	$	-
High yield bond fund		3.3		3.3		-		-
Money market funds		20.7		8.9		17.6		6.6
Total Level 1		57.7		44.2		17.6		6.6
Level 2:
U.S. Government issued debt securities       (agency and treasury)		23.3		29.9		12.0		17.0
Corporate debt securities		24.2		25.1		15.4		17.4
Municipal bonds		10.8		10.8		10.5		10.6
Asset backed securities		6.5		6.1		0.7		0.9
Other fixed income securities		1.2		5.0		0.6		4.3
Total Level 2		66.0		76.9		39.2		50.2
Total Marketable Securities	$	123.7	$	121.1	$	56.8	$	56.8

Fixed income securities classified as Level 2 in the fair value hierarchy are valued using outside pricing services and these values are validated by the trustee.  U.S. Treasury and Agency bonds are valued using market approaches that incorporate transactions for the same or similar bonds and adjustments for yields and maturity dates.  Corporate bonds are valued using a market approach, utilizing recent trades of the same or similar instrument and also incorporating yield curves, credit spreads and specific bond terms and conditions.  Municipal bonds are valued using a market approach that incorporates reported trades and benchmark yields.  Asset-backed securities include collateralized mortgage obligations, commercial mortgage-backed securities, and securities collateralized by auto loans, credit card loans or receivables.  Asset-backed securities are valued using recent trades of similar instruments, pre payment assumptions, yield curves, issuance and maturity dates and tranche information.  Other bonds are valued using pricing models, quoted prices of securities with similar characteristics, and discounted cash flows.

Not included in the tables above are $9.6 million and $11.6 million of cash equivalents as of March 31, 2010 and December 31, 2009, respectively, held by NU parent in an unrestricted money market account and included in Cash and cash equivalents on the accompanying unaudited condensed consolidated balance sheets of NU, which are classified as Level 1 in the fair value hierarchy.

10.

SEGMENT INFORMATION

Presentation:  NU is organized between the Regulated companies’ segments and NU Enterprises based on a combination of factors, including the characteristics of each business' products and services, the sources of operating revenues and expenses and the regulatory environment in which each segment operates.  Cash flows for total investments in plant included in the segment information below are cash capital expenditures that do not include amounts incurred but not paid, cost of removal, AFUDC related to equity funds, and the capitalized portions of pension and PBOP expense or income.  

The Regulated companies’ segments, including the electric distribution and transmission segments, as well as the natural gas distribution segment (Yankee Gas), represented approximately 99 percent of NU's total consolidated revenues for the three-month periods ended March 31, 2010 and 2009.  PSNH's distribution segment includes its generation activities.  CL&P's, PSNH's and WMECO's complete unaudited condensed consolidated financial statements are included in this combined Quarterly Report on Form 10-Q.  Also included in this combined Quarterly Report on Form 10-Q is detailed information regarding CL&P's, PSNH's, and WMECO's transmission segments.

NU Enterprises is comprised of the following:  1) Select Energy (wholesale contracts), 2) Boulos, 3) NGS, 4) NGS Mechanical, 5) SECI, and 6) NU Enterprises parent.  As a result of the sale of NU Enterprises' retail marketing and competitive generation businesses, the financial information used by management was reduced to the remaining wholesale contracts, the operations of the remaining electrical contracting business and NU Enterprises parent.  The remaining operations of NU Enterprises have been aggregated and presented as one business for the three months ended March 31, 2010 and 2009.

Other in the tables below primarily consists of 1) the results of NU parent, which includes other income related to the equity in earnings of NU parent's subsidiaries and interest income from the NU Money Pool, which are both eliminated in consolidation, and interest income and expense related to the cash and debt of NU parent, respectively, 2) the revenues and expenses of NU's service companies, most of which are eliminated in consolidation, and 3) the results of other subsidiaries, which are comprised of RRR (a real estate subsidiary), the non-energy-related subsidiaries of Yankee (Yankee Energy Services Company and Yankee Energy Financial Services Company) and the remaining operations of HWP that were not exited as part of the sale of the competitive generation business in 2006 and the sale of its transmission business to WMECO in December 2008.  

Regulated companies' revenues from the sale of electricity and natural gas primarily are derived from residential, commercial and industrial customers and are not dependent on any single customer.

44

NU's segment information for the three months ended March 31, 2010 and 2009 is as follows (some amounts may not agree between the financial statements and the segment schedules due to rounding):

	For the Three Months Ended March 31, 2010
	Regulated Companies
	Distribution
(Millions of Dollars)	Electric		Natural Gas		Transmission		NU Enterprises		Other		Eliminations		Total
Operating revenues	$	1,000.0	$	171.7	$	153.7	$	19.3	$	104.8	$	(110.1)	$	1,339.4
Depreciation and amortization		(103.1)		(3.6)		(20.3)		(0.1)		(3.7)		1.0		(129.8)
Other operating expenses		(801.4)		(129.7)		(47.0)		(13.5)		(102.3)		111.0		(982.9)
Operating income/(loss)		95.5		38.4		86.4		5.7		(1.2)		1.9		226.7
Interest expense, net of AFUDC		(36.5)		(4.9)		(19.5)		(0.4)		(7.2)		1.2		(67.3)
Interest income		0.8		-		0.1		-		1.3		(1.4)		0.8
Other income, net		4.5		-		2.6		-		111.7		(111.5)		7.3
Income tax (expense)/benefit		(35.2)		(13.9)		(28.9)		(3.0)		1.4		(0.3)		(79.9)
Net income		29.1		19.6		40.7		2.3		106.0		(110.1)		87.6
Net income attributable to   noncontrolling interest		(0.8)		-		(0.6)		-		-		-		(1.4)
Net income attributable to  controlling interest	$	28.3	$	19.6	$	40.1	$	2.3	$	106.0	$	(110.1)	$	86.2
Total assets	$	8,795.7	$	1,364.9	$	3,331.1	$	115.7	$	5,800.1	$	(5,302.1)	$	14,105.4
Cash flows for total   investments in plant	$	115.7	$	12.9	$	55.6	$	-	$	18.3	$	-	$	202.5

	For the Three Months Ended March 31, 2009
	Regulated Companies
	Distribution
(Millions of Dollars)	Electric		Natural Gas		Transmission		NU Enterprises		Other		Eliminations		Total
Operating revenues	$	1,246.0	$	201.8	$	134.2	$	20.7	$	107.1	$	(116.3)	$	1,593.5
Depreciation and amortization		(127.3)		(6.7)		(17.4)		(0.1)		(3.3)		0.2		(154.6)
Other operating expenses		(1,029.2)		(157.7)		(39.5)		(9.8)		(98.3)		112.9		(1,221.6)
Operating income		89.5		37.4		77.3		10.8		5.5		(3.2)		217.3
Interest expense, net of AFUDC		(37.9)		(6.4)		(17.6)		(1.2)		(10.1)		2.2		(71.0)
Interest income		0.9		-		0.1		-		2.5		(2.3)		1.2
Other income/(loss), net		3.8		-		(0.8)		-		81.9		(81.9)		3.0
Income tax (expense)/benefit		(15.6)		(11.7)		(23.0)		(3.8)		3.3		(0.6)		(51.4)
Net income		40.7		19.3		36.0		5.8		83.1		(85.8)		99.1
Net income attributable to   noncontrolling interest		(0.8)		-		(0.6)		-		-		-		(1.4)
Net income attributable to  controlling interest	$	39.9	$	19.3	$	35.4	$	5.8	$	83.1	$	(85.8)	$	97.7
Cash flows for total   investments in plant	$	128.7	$	13.3	$	59.4	$	-	$	7.5	$	-	$	208.9

The information related to the distribution and transmission segments for CL&P, PSNH and WMECO for the three months ended March 31, 2010 and 2009 is as follows:

	CL&P - For the Three Months Ended March 31, 2010
(Millions of Dollars)	Distribution		Transmission		Total
Operating revenues	$	671.2	$	123.8	$	795.0
Depreciation and amortization		(75.8)		(16.7)		(92.5)
Other operating expenses		(541.3)		(35.7)		(577.0)
Operating income		54.1		71.4		125.5
Interest expense, net of AFUDC		(22.4)		(16.1)		(38.5)
Interest income		0.5		0.1		0.6
Other income, net		2.2		2.1		4.3
Income tax expense		(19.4)		(24.1)		(43.5)
Net income	$	15.0	$	33.4	$	48.4
Total assets	$	5,664.8	$	2,605.5	$	8,270.3
Cash flows for total investments in plant	$	63.8	$	33.9	$	97.7

45

	CL&P - For the Three Months Ended March 31, 2009
(Millions of Dollars)	Distribution		Transmission		Total
Operating revenues	$	843.8	$	110.7	$	954.5
Depreciation and amortization		(85.6)		(14.4)		(100.0)
Other operating expenses		(709.5)		(29.6)		(739.1)
Operating income		48.7		66.7		115.4
Interest expense, net of AFUDC		(22.5)		(15.2)		(37.7)
Interest income		0.7		0.1		0.8
Other income/(loss), net		2.9		(1.0)		1.9
Income tax expense		(7.4)		(19.9)		(27.3)
Net income	$	22.4	$	30.7	$	53.1
Cash flows for total investments in plant	$	77.7	$	38.6	$	116.3

	PSNH - For the Three Months Ended March 31, 2010
(Millions of Dollars)	Distribution		Transmission		Total
Operating revenues	$	238.9	$	19.7	$	258.6
Depreciation and amortization		(20.1)		(2.6)		(22.7)
Other operating expenses		(188.4)		(7.6)		(196.0)
Operating income		30.4		9.5		39.9
Interest expense, net of AFUDC		(10.3)		(2.1)		(12.4)
Interest income		0.2		-		0.2
Other income, net		1.8		0.4		2.2
Income tax expense		(11.0)		(3.1)		(14.1)
Net income	$	11.1	$	4.7	$	15.8
Total assets	$	2,285.0	$	450.4	$	2,735.4
Cash flows for total investments in plant	$	45.7	$	8.4	$	54.1

	PSNH - For the Three Months Ended March 31, 2009
(Millions of Dollars)	Distribution		Transmission		Total
Operating revenues	$	291.3	$	16.4	$	307.7
Depreciation and amortization		(32.7)		(2.1)		(34.8)
Other operating expenses		(230.1)		(6.7)		(236.8)
Operating income		28.5		7.6		36.1
Interest expense, net of AFUDC		(10.9)		(1.7)		(12.6)
Interest income		0.1		-		0.1
Other income, net		1.1		0.3		1.4
Income tax expense		(5.3)		(2.2)		(7.5)
Net income	$	13.5	$	4.0	$	17.5
Cash flows for total investments in plant	$	39.2	$	13.3	$	52.5

	WMECO - For the Three Months Ended March 31, 2010
(Millions of Dollars)	Distribution		Transmission		Total
Operating revenues	$	90.0	$	10.2	$	100.2
Depreciation and amortization		(7.3)		(1.0)		(8.3)
Other operating expenses		(71.8)		(3.7)		(75.5)
Operating income		10.9		5.5		16.4
Interest expense, net of AFUDC		(3.7)		(1.2)		(4.9)
Interest income		0.1		-		0.1
Other income, net		0.4		0.1		0.5
Income tax expense		(4.7)		(1.7)		(6.4)
Net income	$	3.0	$	2.7	$	5.7
Total assets	$	851.8	$	271.6	$	1,123.4
Cash flows for total investments in plant	$	6.2	$	12.9	$	19.1

46

	WMECO - For the Three Months Ended March 31, 2009
(Millions of Dollars)	Distribution		Transmission		Total
Operating revenues	$	111.0	$	7.1	$	118.1
Depreciation and amortization		(9.1)		(0.8)		(9.9)
Other operating expenses		(89.7)		(3.2)		(92.9)
Operating income		12.2		3.1		15.3
Interest expense, net of AFUDC		(4.4)		(0.8)		(5.2)
Interest income		0.1		-		0.1
Other income, net		(0.2)		(0.1)		(0.3)
Income tax expense, net		(2.9)		(0.9)		(3.8)
Net income	$	4.8	$	1.3	$	6.1
Cash flows for total investments in plant	$	11.8	$	7.4	$	19.2

11.

COMMON SHAREHOLDERS' EQUITY AND NONCONTROLLING INTEREST (NU)

A summary of the changes in common shareholders' equity and noncontrolling interest of NU for the three months ended March 31, 2010 and 2009 is as follows:

	For the Three Months Ended March 31,
	2010				2009
(Millions of Dollars)	Common Shareholders' Equity		Noncontrolling Interest		Common Shareholders' Equity		Noncontrolling Interest
Balance, beginning of period	$	3,577.9	$	116.2	$	3,020.3	$	116.2
Net income		87.6		-		99.1		-
Dividends on common shares		(45.5)		-		(37.3)		-
Dividends on preferred shares of CL&P		(1.4)		(1.4)		(1.4)		(1.4)
Issuance of common shares		5.2		-		387.4		-
Capital stock expenses, net		-		-		(12.6)		-
Other transactions, net		0.7		-		0.4		-
Net income attributable to noncontrolling   interest		-		1.4		-		1.4
Other comprehensive income (Note 5)		0.7		-		0.2		-
Balance, end of period	$	3,625.2	$	116.2	$	3,456.1	$	116.2

For the three months ended March 31, 2010 and 2009, there was no change in NU parent's 100 percent ownership of the common equity of CL&P.  

12.

SUBSEQUENT EVENTS (CL&P, YANKEE GAS)

On April 1, 2010, CL&P remarketed $62 million of PCRBs.  The PCRBs, which mature on May 1, 2031, carry a coupon of 1.4 percent during the current one-year fixed-rate period and are subject to a mandatory tender for purchase on April 1, 2011, after which CL&P can remarket the bonds.  

On April 22, 2010, Yankee Gas issued $50 million of Series K first mortgage bonds with a coupon rate of 4.87 percent and a maturity date of April 1, 2020.  The proceeds of these bonds were used to repay short-term borrowings and to fund ongoing capital investment programs.  

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of Northeast Utilities:

We have reviewed the accompanying condensed consolidated balance sheet of Northeast Utilities and subsidiaries (the "Company") as of March 31, 2010, and the related condensed consolidated statements of income and cash flows for the three-months ended March 31, 2010 and 2009.  These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States).  A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.  It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet and consolidated statement of capitalization of Northeast Utilities and subsidiaries as of December 31, 2009, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 26, 2010, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2009 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/	Deloitte & Touche LLP
	Deloitte & Touche LLP

Hartford, Connecticut

May 7, 2010

48

NORTHEAST UTILITIES AND SUBSIDIARIES

Management's Discussion and Analysis of
Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related combined notes included in this Quarterly Report on Form 10-Q and the 2009 Form 10-K.  References in this Form 10-Q to "NU," the "Company," "we," "us" and "our" refer to Northeast Utilities and its consolidated subsidiaries.  All per share amounts are reported on a fully diluted basis.

Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations.

The only common equity securities that are publicly traded are common shares of NU.  The earnings and EPS of each business discussed below do not represent a direct legal interest in the assets and liabilities allocated to such business but rather represent a direct interest in our assets and liabilities as a whole.  EPS by business is a financial measure not recognized under GAAP that is calculated by dividing the net income or loss attributable to controlling interest of each business by the weighted average fully diluted NU common shares outstanding for the period.  We use this non-GAAP financial measure to evaluate earnings results and to provide details of earnings results and guidance by business.  We believe that this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of our businesses.  This non-GAAP financial measure should not be considered as an alternative to our consolidated fully diluted EPS determined in accordance with GAAP as an indicator of operating performance.

Reconciliations of the above non-GAAP financial measures to the most directly comparable GAAP measures of consolidated fully diluted EPS and Net income attributable to controlling interest are included under "Financial Condition and Business Analysis-Overview-Consolidated" and "Financial Condition and Business Analysis-Future Outlook" in Management's Discussion and Analysis, herein.

Forward-Looking Statements:   From time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, assumptions of future events, financial performance or growth and other statements that are not historical facts.  These statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  You can generally identify our forward-looking statements through the use of words or phrases such as "estimate," "expect," "anticipate," "intend," "plan," "project," "believe," "forecast," "should," "could," and other similar expressions.  Forward-looking statements are based on the current expectations, estimates, assumptions or projections of management and are not guarantees of future performance.  These expecta tions, estimates, assumptions or projections may vary materially from actual results.  Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause our actual results to differ materially from those contained in our forward-looking statements, including, but not limited to:

·

actions or inaction by local, state and federal regulatory bodies

·

changes in business and economic conditions, including their impact on interest rates, bad debt expense, and demand for our products and services

·

changes in weather patterns

·

changes in laws, regulations or regulatory policy

·

changes in levels and timing of capital expenditures

·

disruptions in the capital markets or other events that make our access to necessary capital more difficult or costly

·

developments in legal or public policy doctrines

·

technological developments

·

changes in accounting standards and financial reporting regulations

·

fluctuations in the value of our remaining competitive electricity positions

·

actions of rating agencies, and

·

other presently unknown or unforeseen factors.  

Other risk factors are detailed in our reports filed with the SEC and updated from time to time, and we encourage you to consult such disclosures.

All such factors are difficult to predict, contain uncertainties which may materially affect our actual results and are beyond our control.  You should not place undue reliance on the forward-looking statements, each speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.  New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can management assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.  For more information, see Item 1A, Risk Factors, included in this Quarterly Report on Form 10-Q and in our 2009 Form 10-K.  This Quarterly Report on Form 10-Q and our 2009 Form 10-K also describe material contingencies and critical accounting policies and estimates in the respective Management’s Discussion and Analysis and Combined Notes to Consolidated Financial Statements.  We encourage you to review these items.

49

Financial Condition and Business Analysis

Executive Summary

The following items in this executive summary are explained in more detail in this Quarterly Report:

Results and Outlook:

·

We earned $86.2 million, or $0.49 per share, in the first quarter of 2010, compared with $97.7 million, or $0.60 per share, in the first quarter of 2009.  First quarter 2010 results reflect a decline in retail electric sales as a result of warmer than normal weather and a net after-tax charge of $3 million, or $0.02 per share, associated with the enactment of the 2010 Healthcare Act in March.

·

Our Regulated companies earned $88 million, or $0.50 per share, in the first quarter of 2010, compared with $94.6 million, or $0.58 per share, in the first quarter of 2009.  

·

Earnings from the distribution segment of our Regulated companies (which also include Yankee Gas and the generation business of PSNH) totaled $47.9 million, or $0.27 per share, in the first quarter of 2010, compared with $59.2 million, or $0.36 per share, in the first quarter of 2009.  Earnings from the transmission segment of our Regulated companies totaled $40.1 million, or $0.23 per share, in the first quarter of 2010, compared with $35.4 million, or $0.22 per share, in the first quarter of 2009.  The decrease in distribution segment results was due primarily to lower revenues resulting from a decline in retail electric sales and higher employee benefit costs.  The higher transmission segment results were due to an increased investment in this segment as we continued to build out our transmission infrastructure to meet our customers' and the region's reliability needs.  

·

Our competitive businesses, which are held by NU Enterprises, earned $2.3 million, or $0.01 per share, in the first quarter of 2010, compared with $5.8 million, or $0.04 per share, in the first quarter of 2009.  NU Enterprises recorded a $0.4 million after-tax mark-to-market loss in the first quarter of 2010, compared with a $3.2 million after-tax mark-to-market gain in the first quarter of 2009.

·

NU parent and other companies recorded net expenses of $4.1 million, or $0.02 per share, in the first quarter of 2010, compared with net expenses of $2.7 million, or $0.02 per share, in the first quarter of 2009 due primarily to a $0.6 million net after-tax charge associated with the 2010 Healthcare Act, a $0.6 million after-tax environmental reserve increase at HWP, and the absence in 2010 of a $0.7 million favorable tax audit settlement.

·

We reaffirmed consolidated 2010 earnings of between $1.80 per share and $2.00 per share, including distribution segment earnings of between $0.95 per share and $1.05 per share, transmission segment earnings of between $0.90 per share and $0.95 per share, competitive business earnings of between zero and $0.05 per share, and net expenses at NU parent and other companies of approximately $0.05 per share.  

Strategy, Regulatory and Other Items:

·

On January 8, 2010, CL&P filed an application with the DPUC to raise distribution rates by $133.4 million to be effective July 1, 2010, and by an additional $44.2 million to be effective July 1, 2011.  CL&P proposed that the first year’s increase be deferred until January 1, 2011 and that approximately $67 million of cash revenue requirements for the second half of 2010 be deferred and recovered from CL&P customers between January 1, 2011 and June 30, 2012.  Hearings were completed and final briefs were filed in April 2010 and a final decision is expected in June 2010.

·

On February 25, 2010, a severe storm with high winds caused nearly 270,000 PSNH customers to lose power.  PSNH estimates that the cost of restoration was approximately $24 million.  On March 13, 2010, another severe storm with high winds caused widespread damage to CL&P’s overhead facilities in southwest Connecticut and caused 160,000 CL&P customers to lose power.  CL&P estimates that the cost of restoration was approximately $21 million.  Both CL&P and PSNH expect the costs associated with these major storms will be recoverable through a combination of insurance proceeds, customer-funded reserves that are established for the purpose of recovering major storm costs, and current distribution revenues.  On March 17, 2010, the DPUC opened a docket to investigate the restoration efforts of CL&P and UI following the outages.

·

On March 16, 2010, the CSC approved CL&P’s application to build the 12-mile section of the proposed GSRP located in Connecticut.  WMECO’s application to build the 23-mile Massachusetts portion of the GSRP from Ludlow, Massachusetts to the Connecticut border is pending before the EFSB with a decision expected in the third quarter of 2010.  GSRP is currently expected to cost $714 million.

·

NU, through a newly-formed holding company, NUTV, and NSTAR Transmission Ventures, Inc., a subsidiary of NSTAR, jointly formed a limited liability company, NPT, to construct, own and operate the Northern Pass line.  Pursuant to NPT’s operating agreement, NUTV holds a 75 percent interest in NPT with NSTAR holding the remaining 25 percent.

·

On March 31, 2010, CL&P filed with the DPUC an AMI and dynamic pricing plan that included a cost-benefit analysis.  CL&P concluded that a full deployment of AMI meters accompanied by dynamic pricing options for all CL&P customers would be cost beneficial under the base case scenario.  The capital expenditures for the installation of the meters is estimated at $296 million.  

50

·

On April 30, 2010, PSNH, the NHPUC staff and the Office of Consumer Advocate submitted a proposed settlement of a distribution rate case PSNH had filed on June 30, 2009 with the NHPUC.  Under the proposed settlement, the parties agreed to a net distribution rate increase of $45.5 million on an annualized basis to be effective July 1, 2010, and annualized distribution rate adjustments projected at negative $2.9 million, and positive $9.5 million and $11.1 million on July 1 of each of the three subsequent years, respectively.  The $45.5 million increase is in addition to the $25.6 million temporary increase that became effective August 1, 2009.  The $45.5 million increase includes $13.7 million to reconcile the difference between the temporary rates and the permanent rates back to August 1, 2009.  Another provision of the settlement was that the authorized regulatory ROE on distribution only pl ant continues at the previously allowed level of 9.67 percent.  A decision by the NHPUC is expected in June 2010.

·

In the legislative session, which closed May 5, 2010, the Connecticut Legislature passed SB 493, which, if it becomes law, would reorganize the DPUC, launch a significant solar generation initiative, allow distribution companies to manage a portfolio that would provide some of their standard service supply and implement reduced distribution rates for low-income customers.  We do not believe that the bill will have an adverse financial impact on us.  In addition, the Connecticut legislature approved a state budget for the 2010-2011 fiscal year.  To fund a revenue gap, the budget calls for the issuance of $956 million of economic recovery revenue bonds that would be amortized over eight years.  These bonds would be repaid through a charge on customer bills of CL&P and other Connecticut electric utility companies.

Liquidity:

·

We completed $145 million of new debt issuances in the first four months of 2010, consisting of $95 million at WMECO and $50 million at Yankee Gas.  Additionally, CL&P remarketed $62 million of tax-exempt PCRBs.  We anticipate no additional long-term debt issuances in 2010.

·

Our cash capital expenditures totaled $202.5 million in the first quarter of 2010, compared with $208.9 million in the first quarter of 2009.  We continue to project total capital expenditures of approximately $1.1 billion in 2010.  

·

We had cash flows provided by operating activities of $159.1 million in the first quarter of 2010, compared with $77.5 million in the first quarter of 2009 (all amounts are net of RRB payments, which are included in financing activities).  The improved cash flows were due primarily to the absence in 2010 of costs at PSNH and WMECO related to the major storm in December 2008 that were paid to vendors in the first quarter of 2009, offset by an increase in income tax payments largely attributable to the absence of bonus depreciation tax deductions in the first quarter of 2010.  We project consolidated cash flows provided by operating activities, net of RRB payments, of approximately $650 million in 2010, which is $50 million lower than our previous projections due primarily to the 2010 severe storm costs.

·

Our cash and cash equivalents totaled $30 million as of March 31, 2010, compared with $27 million as of December 31, 2009.  As of March 31, 2010, we had $694.1 million of aggregate borrowing availability on our revolving credit lines, compared with $702.8 million as of December 31, 2009.

Overview

Consolidated:  We earned $86.2 million, or $0.49 per share, in the first quarter of 2010, compared with $97.7 million, or $0.60 per share, in the first quarter of 2009.  EPS for both years reflect the issuance of nearly 19 million common shares on March 20, 2009.  First quarter 2010 results were negatively impacted by a decline in the distribution segment retail electric sales as a result of warmer than normal weather.  First quarter 2010 results also reflect a net after-tax charge of $3 million, or $0.02 per share, associated with the enactment of the 2010 Healthcare Act in March.

The 2010 Healthcare Act includes a provision that eliminated the tax deductibility of certain PBOP contributions equal to the amount of the federal subsidy received by companies like NU, which sponsor retiree health care benefit plans with a prescription drug benefit that is actuarially equivalent to Medicare Part D.  We recorded approximately $18 million in charges to Income tax expense on the accompanying unaudited condensed consolidated statement of income for the three months ended March 31, 2010 as a result of the 2010 Healthcare Act.  This represented the loss of previously recognized tax benefits.  Since the electric and natural gas distribution companies are cost-of-service and rate regulated, some of these costs are able to be deferred and recovered through future rates.  As a result, we recognized a deferred asset of approximately $15 million, net of tax, which reflects the probable recovery in future rates of these previou sly recognized lost tax benefits.  Therefore, only the net amount of $3 million resulted in a charge to earnings for the three months ended March 31, 2010.

As a result of the elimination of the tax deduction in 2010, NU will not be able to recognize approximately $2 million of current period benefits.  Therefore, NU's projected 2010 effective tax rate, including these discrete items expected to occur during 2010, is estimated to be approximately 38 percent.  Excluding the impacts of discrete items, NU's 2010 effective tax rate would be estimated to be approximately 36 percent.

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A summary of our earnings by business, which also reconciles the non-GAAP financial measures of consolidated non-GAAP earnings and EPS, as well as EPS by business, to the most directly comparable GAAP measures of consolidated net income attributable to controlling interest and fully diluted EPS, for the first quarters of 2010 and 2009 is as follows:

	For the Three Months Ended March 31,
(Millions of Dollars, except	2010				2009
Per share amounts)	Amount		Per Share		Amount		Per Share
Net income attributable to controlling  interest (GAAP)	$	86.2	$	0.49	$	97.7	$	0.60
Regulated companies	$	88.0	$	0.50	$	94.6	$	0.58
Competitive businesses		2.3		0.01		5.8		0.04
NU parent and other companies		(4.1)		(0.02)		(2.7)		(0.02)
Net income attributable to controlling  interest (GAAP)	$	86.2	$	0.49	$	97.7	$	0.60

Regulated Companies:  Our Regulated companies operate in two segments:  electric transmission and electric and natural gas distribution, with PSNH generation included in its distribution segment.  A summary of our Regulated companies' earnings by segment for the first quarters of 2010 and 2009 is as follows:

	For the Three Months Ended March 31,
(Millions of Dollars)	2010		2009
CL&P Transmission	$	32.7	$	30.1
PSNH Transmission		4.7		4.0
WMECO Transmission		2.7		1.3
Total Transmission		40.1		35.4
CL&P Distribution		14.3		21.6
PSNH Distribution		11.1		13.5
WMECO Distribution		2.9		4.8
Yankee Gas		19.6		19.3
Total Distribution		47.9		59.2
Net Income - Regulated Companies	$	88.0	$	94.6

The higher first quarter 2010 transmission segment earnings reflect an increased investment in this segment as we continued to build out our transmission infrastructure to meet our customers' and the region's reliability needs, partially offset by a $0.8 million after-tax charge associated with the 2010 Healthcare Act.

CL&P’s first quarter 2010 distribution segment earnings were $7.3 million lower than the same period in 2009 due primarily to lower revenues resulting from a 4.9 percent decline in retail electric sales, higher employee benefit costs, lower Energy Independence Act incentives, and the absence in 2010 of lower state income taxes in the first quarter of 2009 that resulted from the closure of the normal audit process, partially offset by lower operating and maintenance costs.  For the 12 months ended March 31, 2010, CL&P’s distribution segment regulatory ROE was 6.8 percent, well below its current authorized level of 9.4 percent.  The Company expects it to continue to deteriorate before it improves starting in the second half of 2010 after the DPUC issues its decision on CL&P’s request to raise distribution rates effective July 1, 2010.  CL&P’s request includes an authorized regulatory ROE o f 10.5 percent.

PSNH’s first quarter 2010 distribution segment earnings were $2.4 million lower than the same period in 2009 due primarily to lower revenues resulting from a 5.3 percent decline in retail electric sales, higher employee benefit costs, higher income tax expense totaling $1 million associated with the 2010 Healthcare Act, and higher depreciation, property taxes, and interest expense.  These items were partially offset by the $25.6 million annualized temporary distribution rate increase that took effect August 1, 2009.  For the 12 months ended March 31, 2010, PSNH’s distribution segment regulatory ROE was 6.6 percent (including generation).  PSNH reached a settlement with the NHPUC staff and the Office of Consumer Advocate with respect to PSNH’s permanent distribution rate request.  The settlement was submitted to the NHPUC for approval on April 30, 2010.  If the settlement is approved, PSNH’ ;s regulatory ROE will improve over the remainder of 2010.

WMECO’s first quarter 2010 distribution segment earnings were $1.9 million lower than the same period in 2009 due primarily to lower revenues resulting from a 4.4 percent decline in retail electric sales, higher employee benefit costs, higher administrative and general expenses, and higher depreciation and property taxes.  These items were partially offset by lower interest expense.  For the 12 months ended March 31, 2010, WMECO’s distribution segment regulatory ROE was 7.2 percent and for 2010, we expect it to be approximately 6 percent.

Yankee Gas’ first quarter 2010 earnings were $0.3 million higher than the same period in 2009 due primarily to lower interest expense, depreciation, and operating costs mostly offset by lower revenues resulting from a 3.5 percent decline in firm natural gas sales and higher employee benefit costs.  For the 12 months ended March 31, 2010, Yankee Gas’ regulatory ROE was 6.7 percent and for 2010, we now expect Yankee Gas to earn approximately 8 percent, down from the 9 percent we had previously anticipated.  The expected decline in Yankee Gas' 2010 regulatory ROE is driven by warmer than normal temperatures during the first three months of 2010.  

52

For the distribution segment of our Regulated companies, a summary of changes in CL&P, PSNH and WMECO retail electric GWh sales and Yankee Gas firm natural gas sales for the first quarter of 2010 as compared to the same period in 2009 on an actual and weather normalized basis (using a 30-year average) is as follows:

	For the Three Months Ended March 31, 2010 Compared to 2009
	Electric								Firm Natural Gas
	CL&P		PSNH		WMECO		Total		Yankee Gas
	Percentage Increase/ (Decrease)	Weather Normalized Percentage Increase/ (Decrease)	Percentage Increase/ (Decrease)	Weather Normalized Percentage Increase/ (Decrease)	Percentage Decrease	Weather Normalized Percentage Increase/ (Decrease)	Percentage Decrease	Weather Normalized Percentage Decrease	Percentage Increase/ (Decrease)	Weather Normalized Percentage Increase
Residential	(6.6)%	(1.9)%	(6.1)%	(1.8)%	(2.8)%	1.4 %	(6.1)%	(1.5)%	(5.5)%	6.6%
Commercial	(4.8)%	(3.9)%	(4.9)%	(3.7)%	(5.1)%	(4.6)%	(4.9)%	(4.0)%	(6.1)%	5.4%
Industrial	4.2 %	4.2 %	(4.7)%	(4.7)%	(4.3)%	(4.3)%	-	-	3.5 %	7.7%
Other	(8.0)%	(8.0)%	4.4 %	4.4 %	(45.1)%	(45.1)%	(10.6)%	(10.6)%	-	-
Total	(4.9)%	(2.3)%	(5.3)%	(3.0)%	(4.4)%	(2.3)%	(4.9)%	(2.5)%	(3.5)%	6.4%

A summary of our retail electric sales in GWh for CL&P, PSNH and WMECO and firm natural gas sales in million cubic feet for Yankee Gas for the first quarters of 2010 and 2009 is as follows:  

	For the Three Months Ended March 31,
	Electric			Firm Natural Gas
	2010	2009	Percentage Decrease	2010	2009	Percentage Increase/ (Decrease)
Residential	3,896	4,148	(6.1)%	6,104	6,461	(5.5)%
Commercial	3,456	3,633	(4.9)%	5,882	6,267	(6.1)%
Industrial	1,008	1,009	-	4,457	4,306	3.5 %
Other	88	98	(10.6)%	-	-	-
Total	8,448	8,888	(4.9)%	16,443	17,034	(3.5)%

First quarter 2010 actual and weather normalized retail electric sales for all three electric companies were lower than the same period in 2009.  Residential sales were down for all three electric companies, due in large part to the warmer than normal weather in the first quarter of 2010.  Heating degree days in Connecticut and Western Massachusetts were down 13.5 percent compared to last year and 11.6 percent below normal.  Heating degree days in New Hampshire were down 16 percent compared to last year and 12.1 percent below normal.  The severe storms with high winds that produced extended outages for approximately 430,000 CL&P and PSNH customers in both Connecticut and New Hampshire in the first quarter of 2010 were estimated to have had a minimal effect on residential sales.

Commercial sales were down for all three electric companies due to the warmer than normal weather and prolonged effects of the economic recession, which continued to be felt by commercial customers as they reduced both shifts and operating hours.  Industrial sales declined in both New Hampshire and Western Massachusetts; however, Connecticut saw an increase in industrial sales.  We continue to believe that the decline in industrial sales in New Hampshire and Western Massachusetts is the result of reduced days of operations and reduced worker hours as a result of the current economic climate.  Connecticut industrial sales increased in the first quarter compared to the same period last year, which we believe was due to an exceptionally low level of output in response to reduced demand.  We believe that a portion of these reduced commercial and industrial sales may be regained when the economy recovers.  Further, co mmercial and industrial sales in the first quarter of 2010 were negatively impacted by additional installation of gas-fired distributed generation and utilization of conservation and load management programs.

Firm natural gas sales were lower for both residential and commercial customers in the first quarter of 2010 compared to the same period in 2009.  The decrease in residential and commercial sales can be attributed to the warmer than normal weather in the first quarter of 2010.  On a weather normalized basis, Yankee Gas residential and commercial volumes were higher in the first quarter of 2010 compared to the same period in 2009.  Yankee Gas industrial sales were higher on both an actual and weather normalized basis in the first quarter of 2010 than in the same period in 2009.  Commercial and industrial sales continue to benefit from the addition of gas-fired distributed generation in Yankee Gas’ service territory.

Our expense related to uncollectible receivable balances (our uncollectibles expense) is influenced by the economic conditions of our region.  Fluctuations in our uncollectibles expense are mitigated, however, from an earnings perspective because a portion of the total uncollectibles expense for each of the electric distribution companies is allocated to the respective company’s energy supply rate and recovered through its tariffs.  Additionally, for CL&P and Yankee Gas, write-offs of uncollectible receivable balances attributable to qualified customers under financial or medical duress (or hardship customers) are fully recovered through their respective tariffs.  For the first quarter of 2010, our total uncollectibles expense was approximately $5 million higher than the same period in 2009 due entirely to higher uncollectible receivable balances for hardship customers at CL&P.  This increase in uncollect ibles expense did not impact earnings and will be recovered through CL&P's tariffs.  The first quarter 2010 uncollectibles expense is consistent with our expectations and we continue to expect our 2010 uncollectibles expense that impacts earnings to be significantly lower than it was in 2009.

Competitive Businesses:  NU Enterprises, which continues to manage to completion Select Energy’s remaining wholesale marketing contracts and to manage its electrical contracting business, earned $2.3 million, or $0.01 per share, in the first quarter of 2010, compared with earnings of $5.8 million, or $0.04 per share, in the first quarter of 2009.  Competitive business earnings in the first

53

quarter of 2010 included an after-tax mark-to-market loss of $0.4 million, compared with an after-tax mark-to-market gain of $3.2 million in the first quarter of 2009.  The 2010 results also include a $0.6 million after-tax charge associated with the 2010 Healthcare Act.  

NU Parent and Other Companies:  NU parent and other companies recorded net expenses of $4.1 million, or $0.02 per share, in the first quarter of 2010, compared with net expenses of $2.7 million, or $0.02 per share, in the first quarter of 2009.  The lower results were due primarily to a $0.6 million after-tax charge associated with the 2010 Healthcare Act, a $0.6 million after-tax environmental reserve increase related to additional estimated costs of tar delineation and site characterization studies at an HWP coal tar remediation site, and the absence in 2010 of a $0.7 million favorable tax audit settlement.

Future Outlook

EPS Guidance:  A summary of our projected 2010 EPS by business, which also reconciles consolidated fully diluted EPS to the non-GAAP financial measure of EPS by business, is reaffirmed as follows:  

	2010 EPS Range
(Approximate amounts)		Low		High
Fully Diluted EPS (GAAP)	$	1.80	$	2.00
Regulated companies:
Distribution segment	$	0.95	$	1.05
Transmission segment		0.90		0.95
Total Regulated companies		1.85		2.00
Competitive businesses		-		0.05
NU parent and other companies		(0.05)		(0.05)
Fully Diluted EPS (GAAP)	$	1.80	$	2.00

The reaffirmed earnings guidance above takes into consideration the impacts of the first quarter 2010 retail electric and firm natural gas sales decrease as well as the first quarter and full year 2010 income tax impacts of the 2010 Healthcare Act.  We have also included estimated impacts from current economic conditions in the assumptions that were used to develop our earnings guidance.  The 2010 distribution segment guidance reflects an assumed one percent annual decrease in total weather normalized retail electric sales, a decrease in Yankee Gas' annual uncollectibles expense, and uncertainty around the outcomes of the PSNH distribution rate case that was filed in June 2009 and the CL&P distribution rate case filed in January 2010.  Outcomes in both the PSNH and CL&P rate cases are expected in mid-2010.

A WMECO distribution rate case is expected to be filed in mid-2010 with a decision expected by early 2011.  A Yankee Gas rate case is also being considered for filing no earlier than January 1, 2011.  Neither rate case filing will impact 2010 results.  

Long-Term Growth Rate:  We continue to project that we will achieve a compound average annual EPS growth rate for the five-year period from 2010 to 2014 of between 6 percent and 9 percent using 2009 EPS of $1.91 as the base level.  This EPS growth rate assumes regulatory ROEs averaging approximately 12.25 percent for the transmission segment and an average of approximately 10 percent for the distribution segment (including PSNH and WMECO generation).  We believe this growth will be achieved if our capital program is completed in accordance with our plans, distribution rate case orders enable us to earn the assumed level of regulatory ROEs, and FERC's current transmission policies remain consistent and enable us to achieve projected transmission ROEs.  In addition to the assumptions above, there are certain items that will likely impact this earnings growth rate.  These items include, but are not lim ited to, sales levels; operating expense levels, including maintenance, pension and uncollectibles expense; and lower margins that NU Enterprises expects to earn on Select Energy’s remaining contracts.

Liquidity

Consolidated:  We had $30 million of cash and cash equivalents as of March 31, 2010, compared with $27 million as of December 31, 2009.  

On March 8, 2010, WMECO issued $95 million of senior unsecured notes with a coupon rate of 5.1 percent and a maturity date of March 1, 2020.  

On April 1, 2010, CL&P remarketed $62 million of tax-exempt PCRBs that were subject to a mandatory tender on April 1, 2010.  The PCRBs, which mature on May 1, 2031, carry a coupon rate of 1.4 percent and have a mandatory tender on April 1, 2011, at which time CL&P expects to remarket the bonds.

On April 22, 2010, Yankee Gas issued $50 million of privately placed first mortgage bonds with a coupon rate of 4.87 percent and a maturity date of April 1, 2020.

The proceeds from the above completed financings were used to repay short-term borrowings incurred in the ordinary course of business and to fund ongoing capital investment programs.  We anticipate no additional long-term debt issuances in 2010.

We had cash flows provided by operating activities in the first quarter of 2010 of $159.1 million, compared with operating cash flows of $77.5 million in the first quarter of 2009 (all amounts are net of RRB payments, which are included in financing activities on the

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accompanying unaudited condensed consolidated statements of cash flows).  The improved cash flows were due primarily to the absence in 2010 of costs at PSNH and WMECO related to the major storm in December 2008 that were paid to vendors in the first quarter of 2009, the absence in the first quarter of 2010 of monthly PBOP contributions for the January 2010 to March 2010 periods for which a cumulative contribution of $10.3 million was made in April 2010  (monthly contributions were made in 2009), and an increase in cash flow benefits from accounts payable related to the February and March 2010 unpaid major storm costs impacting both CL&P and PSNH.  Offsetting these favorable cash flow impacts was an increase in income tax payments largely attributable to the absence of bonus depreciation tax deductions under the American Recovery and Reinvestment Act of 2009 in the first quarter of 2010.  Bonus depreciation tax deductions expired at the end of 2009.

We project consolidated cash flows provided by operating activities of approximately $650 million in 2010, net of RRB payments, which is $50 million lower than our previous projections due primarily to the 2010 severe storm costs.  The projection for 2010 operating cash flows reflects a cash contribution to our Pension Plan in the third quarter of 2010 of approximately $45 million, the majority of which will be funded by PSNH.  This contribution will be the first contribution to our Pension Plan in approximately 20 years.

A summary of the current credit ratings and outlooks by Moody's, S&P and Fitch for senior unsecured debt of NU parent and WMECO and senior secured debt of CL&P and PSNH is as follows:

	Moody's		S&P		Fitch
	Current	Outlook	Current	Outlook	Current	Outlook
NU parent	Baa2	Stable	BBB-	Stable	BBB	Stable
CL&P	A2	Stable	BBB+	Stable	A-	Stable
PSNH	A3	Stable	BBB+	Stable	BBB+	Stable
WMECO	Baa2	Stable	BBB	Stable	BBB+	Stable

If NU parent's senior unsecured debt ratings were to be reduced to below investment grade level by either Moody's or S&P, a number of Select Energy's supply contracts would require Select Energy to post additional collateral in the form of cash or LOCs.  If such an event had occurred as of March 31, 2010, Select Energy, under its remaining contracts, would have been required to provide additional cash or LOCs in an aggregate amount of $29 million to various unaffiliated counterparties and additional cash or LOCs in the aggregate amount of $8.6 million to independent system operators.  NU parent would have been and remains able to provide that collateral on behalf of Select Energy.  

If unsecured debt ratings for PSNH were to be reduced by either Moody's or S&P, certain supply contracts could require PSNH to post additional collateral in the form of cash or LOCs with various unaffiliated counterparties.  If PSNH's unsecured debt ratings had been reduced by one level, PSNH would not have been required to post additional collateral as of March 31, 2010.  If these ratings had been reduced by two levels, or below investment grade, the amount of additional collateral required to be posted by PSNH would have been $6.5 million as of March 31, 2010.  PSNH would have been and remains able to provide these collateral amounts.

We paid common dividends of $45.1 million in the first quarter of 2010, compared with $37.2 million in the first quarter of 2009.  The increase reflects a 7.9 percent increase in our common dividend rate that took effect in the first quarter of 2010, as well as a higher number of shares outstanding as a result of the March 2009 equity issuance.  On April 13, 2010, our Board of Trustees declared a quarterly common dividend of $0.25625 per share, payable on June 30, 2010 to shareholders of record as of June 1, 2010.

In general, the Regulated companies pay approximately 60 percent of their earnings to NU parent in the form of common dividends.  In the first quarter of 2010, CL&P, PSNH, WMECO, and Yankee Gas paid $35.8 million, $12.6 million, $3.7 million, and $18.8 million, respectively, in common dividends to NU parent.  In the first quarter of 2010, NU parent made equity contributions of $23.5 million and $66.1 million to PSNH and WMECO, respectively, and no contributions to CL&P and Yankee Gas.

Cash capital expenditures included on the accompanying unaudited condensed consolidated statements of cash flows and described in this "Liquidity" section do not include amounts incurred on capital projects but not yet paid, cost of removal, AFUDC related to equity funds, and the capitalized portions of pension and PBOP expense or income.  A summary of our cash capital expenditures by company for the first quarters of 2010 and 2009 is as follows:

	For the Three Months Ended March 31,
(Millions of Dollars)		2010		2009
CL&P	$	97.7	$	116.3
PSNH		54.1		52.5
WMECO		19.1		19.2
Yankee Gas		12.9		13.4
Other		18.7		7.5
Totals	$	202.5	$	208.9

The decrease in our cash capital expenditures was the result of lower distribution segment capital expenditures of $13.4 million, particularly at CL&P, offset by an increase in Other of $11.2 million primarily related to capital costs at NUSCO, one of our corporate service companies.

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As a result of LBCB's refusal in 2008 to continue to fund its commitment of approximately $56 million under our revolving credit agreements, our aggregate borrowing capacity under those credit facilities was reduced from $900 million to $844 million.  This borrowing capacity, when combined with our access to other funding sources, provides us with adequate liquidity.  

NU parent’s revolving credit agreement, in a nominal aggregate amount of $500 million, $482.3 million excluding the commitment of LBCB, expires on November 6, 2010.  As of March 31, 2010, NU parent had $49.6 million of LOCs issued for the benefit of certain subsidiaries (primarily PSNH) and $100.3 million of borrowings outstanding under this facility.  The weighted-average interest rate on these short-term borrowings as of March 31, 2010 was 0.625 percent, which is based on a variable rate plus an applicable margin based on NU parent's credit ratings.  NU parent had $332.3 million of borrowing availability on this facility as of March 31, 2010, excluding LBCB's commitment, as compared to $341 million of availability as of December 31, 2009.  

The Regulated companies maintain a joint revolving credit agreement in a nominal aggregate amount of $400 million, $361.8 million excluding the commitment of LBCB, which also expires on November 6, 2010.  There were no borrowings outstanding under this facility as of March 31, 2010.  The Regulated companies had $361.8 million of aggregate borrowing availability on this facility as of March 31, 2010 and December 31, 2009, excluding LBCB's commitment and subject to each individual company's borrowing limits.  

Impact of Financial Market Conditions:  While the impact of continued financial market volatility and the extent and impacts of the economic environment cannot be predicted, we are confident that we currently have operating flexibility and access to funding sources to maintain adequate liquidity.  The credit outlooks for NU parent and its Regulated companies are all stable.  Our companies have a low risk of calls for collateral due to our business model, and we have no long-term debt maturing until April 2012.  An estimated cash contribution to our Pension Plan of approximately $45 million is expected to be made in the third quarter of 2010, and we continue to project capital expenditures for 2010 of approximately $1.1 billion.  

We expect to renew our revolving credit agreements before their November 6, 2010 expiration dates and costs associated with the new facilities will be higher than those associated with the existing revolving credit agreements due to changes in credit market conditions.

Business Development and Capital Expenditures

Consolidated:  Our consolidated capital expenditures, including amounts incurred but not paid, cost of removal, AFUDC, and the capitalized portions of pension and PBOP expense or income (all of which are non-cash factors), totaled $182.7 million in the first quarter of 2010, compared with $183 million in the first quarter of 2009.  These amounts included $12.5 million and $4.4 million in the first quarters of 2010 and 2009, respectively, related to our corporate service companies.  

Regulated Companies:  Capital expenditures for the Regulated companies are expected to total approximately $1.1 billion ($441 million for CL&P) in 2010, which includes planned spending of approximately $48 million for our corporate service companies.  

Transmission Segment:  Transmission segment capital expenditures decreased by $5.8 million in the first quarter of 2010, as compared with the same period in 2009, due primarily to reductions in expenditures at CL&P and PSNH, partially offset by increases at WMECO and capital expenditures incurred for the Northern Pass project.  A summary of transmission segment capital expenditures by company in the first quarters of 2010 and 2009 is as follows:

	For the Three Months Ended March 31,
(Millions of Dollars)		2010		2009
CL&P	$	28.2	$	36.4
PSNH		7.1		9.9
WMECO		15.4		10.9
Northern Pass project costs*		0.8		-
Totals	$	51.5	$	57.2

*

Since the inception of the Northern Pass project, we have incurred a total of $2.5 million in costs, $1.7 million of which was recognized in 2009.

In October 2008, CL&P and WMECO made state siting filings in Connecticut and Massachusetts, respectively, for the first and largest component of our NEEWS project, the GSRP.  In October 2009, ISO-NE affirmed the need and need date for GSRP.  On March 16, 2010, the CSC approved the 12-mile section of GSRP that CL&P plans to build in Connecticut.  The CSC approval did not significantly change the project as it was originally proposed and is not expected to have a material impact on the overall cost of GSRP.  Hearings on the 23-mile Massachusetts portion before the state’s EFSB were completed in February 2010, and briefs were filed by the parties on March 26, 2010.  We expect to receive a final EFSB decision in the third quarter of 2010.  GSRP, which involves the construction of 115 KV and 345 KV lines from Ludlow, Massachusetts to Bloomfield, Connecticut, is the largest and most complicated projec t within NEEWS, and is expected to cost $714 million if built according to our preferred route configuration.  Following decisions from the state siting boards and receipt of other required permits, we expect to commence construction in late 2010 or early 2011 and to place the project in service in 2013.  

Our second major NEEWS project is the Interstate Reliability Project, which is being designed and built in coordination with National Grid USA.  CL&P's share of this project includes an approximately 40-mile, 345 KV line from Lebanon, Connecticut to the Connecticut-Rhode Island border where it would connect with enhancements National Grid USA is designing.  We currently expect that CL&P's share of the costs of this project will be $250 million.  Municipal consultations concluded in November 2008, and CL&P plans to file its

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siting application with Connecticut regulators in early 2011 following the completion of ISO-NE’s reassessment of the need date and issuance of its regional system plan.  We currently expect the project to be placed in service in late 2014.  

The third major part of NEEWS is the Central Connecticut Reliability Project, which involves construction of a new line from Bloomfield, Connecticut to Watertown, Connecticut.  This line would provide another 345 KV connection to move power across the state of Connecticut.  The timing of this project would be six to twelve months behind the Interstate Reliability Project.  This project is currently expected to cost $315 million.  

ISO-NE is currently performing an evaluation of all projects in its regional system plan, including the other components of NEEWS, and assessing the presently estimated need dates for these projects.  We expect ISO-NE’s view on need dates for the second and third major NEEWS projects to be updated in the next version of the regional system plan, a draft of which we expect to see during the third quarter of 2010.  

Included as part of NEEWS are $211 million of associated reliability related expenditures for projects, of which over $50 million are moving forward through the siting and construction phases and are expected to be completed in advance of the three major projects.  On March 19, 2010, the DPU approved a $23 million project from West Springfield to Agawam, Massachusetts.  We expect to commence work on this project later this year and complete it in 2011.  

We currently expect that CL&P's and WMECO's total capital expenditures for NEEWS will be $1.49 billion.  Our current capital expenditure and rate base forecasts assume that all NEEWS projects are completed by the end of 2014.  However, the timing and amount of our projected annual capital spending could be affected if receipt of siting approvals is delayed or if the need dates for these projects change through ISO-NE's regional system planning process.  During the siting approval process, state regulators may require changes in configuration (including placing some lines underground) to address local concerns that could increase construction costs.  Our current design for NEEWS does not contemplate any underground lines.  Building any lines underground, particularly 345 KV lines, would increase total costs of the project beyond those reflected above.  Since inception of NEEWS through March 31, 2010, CL&a mp;P and WMECO have capitalized approximately $75.1 million and $82.5 million, respectively, in costs associated with NEEWS, of which $7.6 million and $8.2 million, respectively, were capitalized in the first quarter of 2010.  

NU, through a newly-formed holding company, NUTV, and NSTAR Transmission Ventures, Inc., a subsidiary of NSTAR, jointly formed a limited liability company, NPT, to construct, own and operate the Northern Pass line, a new HVDC transmission line from Canada to New Hampshire that will interconnect with a transmission line being developed by HQ-Trans-Energie, the transmission affiliate of Hydro-Québec.  Pursuant to NPT’s operating agreement, NUTV holds a 75 percent interest in NPT with NSTAR holding the remaining 25 percent.  Under the proposed arrangement with HQ, NPT would sell to HQ or its subsidiary 1,200 MW of firm electric transmission service over the Northern Pass line in order for HQ to sell and deliver this same amount of electric power from low-carbon energy resources to New England.

We continue to make progress in the design of the Northern Pass line.  We have reached conceptual agreement in the development of a Transmission Service Agreement (TSA) with HQ.  The TSA will be subject to FERC approval and will establish risk allocation and cost recovery for the project.  We are continuing our early engineering work on the line and we will begin significant public communications and outreach efforts in the New Hampshire communities where new facilities are expected to be located.  We expect to file the project design with ISO-NE for technical review and the TSA with the FERC by mid-2010.  There are a number of additional state and federal permits that will be required to site the Northern Pass project line and we anticipate we will begin the process of filing those applications in 2010.  We currently expect to begin construction of the line in late 2012 and have power flowing in 2015.   ;We continue to expect our share of this project to cost $675 million.

In addition, the NU Regulated companies and NSTAR are continuing to negotiate one or more long-term power purchase agreements with HQ for power transmitted over the Northern Pass line.  Our intention is to create a power purchase agreement structure that could be offered to other load serving entities in addition to NU and NSTAR.  Power purchase agreement terms will be subject to state regulatory approvals.  We anticipate filing these power purchase agreements subsequent to the TSA.

Distribution Segment:  Distribution segment capital expenditures decreased by $2.7 million in the first quarter of 2010, as compared with the same period in 2009.  A summary of distribution segment capital expenditures by company for the first quarters of 2010 and 2009 is as follows:

		For the Three Months Ended March 31,
(Millions of Dollars)		2010		2009
CL&P	$	57.3	$	65.4
PSNH		14.4		18.4
WMECO		5.3		6.9
Totals - Electric distribution (excluding generation)		77.0		90.7
Yankee Gas		7.0		10.2
Other		-		0.1
Total distribution		84.0		101.0
PSNH generation		34.7		20.4
Total distribution segment	$	118.7	$	121.4

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PSNH's Clean Air Project is a $457 million wet scrubber project at its Merrimack coal station, the cost of which will be recovered through PSNH's ES rates under New Hampshire law.  Construction is expected to be under budget and completed in mid-2012.  Since inception of the project, PSNH has capitalized $178.8 million associated with this project, of which $32 million was capitalized in the first quarter of 2010.  Construction of the project was approximately 51 percent complete as of March 31, 2010.  

In April 2010, Yankee Gas commenced its WWL Project, the construction of a 16-mile gas pipeline between Waterbury and Wallingford, Connecticut and the increase of vaporization output of its LNG plant.  Since inception of the project, Yankee Gas has capitalized $1.2 million associated with this project, $0.4 million of which was capitalized in the first quarter of 2010.

Strategic Initiatives:  We continue to evaluate certain development projects that will benefit our customers, which are detailed below.  

Over the past two years, we have participated in discussions with other utilities, policymakers, and prospective developers of renewable energy projects in the New England region regarding a framework whereby renewable power projects built in rural areas of northern New England could be connected to the electric load centers of New England.  We believe there are significant opportunities for developers to build wind and biomass projects in northern New England that could help the region meet its renewable portfolio standards.  We believe that a collaborative approach among project developers and transmission owners is necessary to be able to construct needed projects and bring their electrical output into the market.  To date, most discussions have been conceptual in nature and therefore we have not yet included any capital expenditures associated with potential projects in our five-year capital program.    

On March 31, 2010, CL&P filed with the DPUC an AMI and dynamic pricing plan that included a cost benefit analysis.  CL&P concluded that a full deployment of AMI meters accompanied by dynamic pricing options for all CL&P customers would be cost beneficial under a set of reasonable assumptions, identified as the "base case scenario."  Under the base case scenario, capital expenditures associated with the installation of the meters are estimated at $296 million, which amount is not included in our five-year capital expenditure projections.  Under CL&P's proposal, installation of meters is proposed to begin in late 2012 and continue through 2016.  CL&P proposes to file by mid-2012 with the DPUC a detailed implementation plan that includes results of an RFP to select deployment vendors, reflects industry AMI standards that are under development, and presents a full timeline for the rollout of AMI meters and dynamic pricings.

On October 16, 2009, WMECO filed its proposal for a dynamic pricing smart meter pilot program with the DPU.  The program proposes to involve 1,750 customers in WMECO's service region for a term of six months beginning in April 2011.  The total cost of the project is estimated to be $7 million, which would be recovered through rates WMECO would charge to customers taking Basic Service.  A decision is expected from the DPU by August 1, 2010.

On August 12, 2009, the DPU approved a stipulation agreement between WMECO and the Massachusetts Attorney General concerning WMECO's proposal, under the Massachusetts Green Communities Act, to install 6 MW of solar energy generation in its service territory at an estimated cost of $41 million.  On February 17, 2010, WMECO announced that it planned to install 1.8 MW of the 6 MW at a site in Pittsfield, Massachusetts.  That project is expected to cost between $10 million to $12 million.

Transmission Rate Matters

Transmission - Wholesale Rates:  NU's transmission rates recover total transmission revenue requirements, ensuring that we recover all regional and local revenue requirements.  These rates provide for annual true-ups to actual costs.  The financial impacts of differences between actual and projected costs are deferred for future recovery from or refund to customers.  As of March 31, 2010, NU was in a total underrecovery position of $41.5 million ($29 million for CL&P) of which $38.8 million ($28.2 million for CL&P) will be collected from customers in June 2010.

Legislative Matters

2010 Federal Legislation: On March 23, 2010, President Obama signed into law the 2010 Healthcare Act, which includes a provision that eliminated the tax deductibility of certain PBOP contributions equal to the amount of the federal subsidy received by companies like NU, which sponsor retiree health care benefit plans with a prescription drug benefit that is actuarially equivalent to Medicare Part D.  As a result of the 2010 Healthcare Act, for the three months ended March 31, 2010, we recorded a net after-tax charge of $3 million in the accompanying unaudited condensed consolidated statement of income.  As a result of the elimination of the tax deduction in 2010, NU will not be able to recognize approximately $2 million of current period benefits.  Therefore, NU's projected  2010 effective tax rate, including these discrete items expected to occur during 2010, is estimated to be approximately 38 percent.  Excluding the impacts of discrete items, NU's 2010 effective tax rate would be estimated to be approximately 36 percent.

2010 Connecticut Legislation:  On May 5, 2010, the Connecticut Legislature passed senate bill 493, which, if it becomes law, would reorganize the DPUC, launch a significant solar generation initiative, allow distribution companies to manage a portfolio that would provide some of their standard service supply and implement reduced distribution rates for low-income customers.  While we do not believe that the bill will have an adverse financial impact on us, we are concerned that certain elements, particularly the solar mandate, would increase customer prices.

In addition, the Connecticut Legislature approved a state budget for the 2010-2011 fiscal year, which calls for the issuance of $956 million of economic recovery revenue bonds that would be amortized over eight years.  These bonds would be repaid through a charge on customer bills of CL&P and other Connecticut utilities.  For CL&P, the revenue to pay interest and principal on the bonds would come from a continuation of a portion of its CTA, which would otherwise end at the end of this year, and the diversion of about one-third

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of the annual funding for C&LM programs beginning in 2012.  The specifics of these adjustments will be determined by the DPUC.  On average, we believe that the CL&P portion to support these bonds would be about $108 million annually.

Regulatory Developments and Rate Matters

2010 Major Storms:  In the first quarter of 2010, severe storms struck portions of the Northeast region damaging the distribution systems and causing extensive power outages in both CL&P’s and PSNH’s service territories.  On February 25, 2010, a severe storm with high winds caused nearly 270,000 PSNH customers to lose power.  Restoration was completed by March 3, 2010.  PSNH estimates that the cost of restoration was approximately $24 million.  On March 13, 2010, another severe storm with high winds caused widespread damage to CL&P’s overhead facilities in southwest Connecticut, and caused 160,000 CL&P customers to lose power.  CL&P estimates that the cost of restoration was approximately $21 million.  Both CL&P and PSNH expect the costs associated with these major storms will be recoverable through a combination of insurance proceeds, customer-funded reser ves that are established for the purpose of recovering major storm costs, and current distribution revenues.  On March 17, 2010, the DPUC opened a docket to investigate the restoration efforts of CL&P and UI following the outages.  We do not expect the outcome of the DPUC’s investigation to have a material adverse impact on CL&P’s earnings, financial position, or cash flows.

Connecticut - CL&P:

Distribution Rates:  On January 8, 2010, CL&P filed an application with the DPUC to raise distribution rates by $133.4 million, or 3.4 percent over current revenues, to be effective July 1, 2010, and by an additional $44.2 million, or 1.1 percent over current revenues, to be effective July 1, 2011.  Among other items, CL&P is seeking an increase in its authorized ROE from the current 9.4 percent to 10.5 percent.  CL&P proposed that the first year’s increase be deferred until January 1, 2011 and that approximately $67 million of cash revenue requirements for the second half of 2010 be deferred and recovered from CL&P customers between January 1, 2011 and June 30, 2012.  If approved by the DPUC, an annualized $210 million increase in distribution rates would take effect on January 1, 2011.  CL&P expects that as a result of a decline in stranded cost recoveries due to the final a mortization of CL&P’s RRBs in December 2010, CL&P’s CTA will decline by approximately $230 million on an annualized basis on January 1, 2011, more than offsetting the impact of the distribution rate increase.  Hearings before the DPUC were completed and final briefs were filed in April 2010.  A final decision is expected in June 2010.

Standard Service and Last Resort Service Rates:  CL&P's residential and small commercial customers who do not choose competitive suppliers are served under SS rates, and large commercial and industrial customers who do not choose competitive suppliers are served under LRS rates.  Effective January 1, 2010, the DPUC approved a decrease to CL&P’s total average SS rates of approximately 4.6 percent.  The energy supply portion of the total average SS rate decreased from 12.516 cents per KWh to 11.289 cents per KWh.  Effective April 1, 2010, the DPUC approved a decrease to CL&P’s total average LRS rate of approximately 11.3 percent.  The energy supply portion of the total average LRS rate decreased from 9.662 cents per KWh to 8.055 cents per KWh.  CL&P is fully recovering from customers the costs of its SS and LRS services.

CTA and SBC Reconciliation:   On March 31, 2010, CL&P filed with the DPUC its 2009 CTA and SBC reconciliation, which compared CTA and SBC revenues charged to customers to revenue requirements and allows for full recovery of revenue requirements.  For the 12 months ended December 31, 2009, total CTA revenue requirements exceeded CTA revenues by $46.9 million, which was recorded as an increase to Regulatory assets on the accompanying unaudited condensed consolidated balance sheet.  For the 12 months ended December 31, 2009, the SBC revenues exceeded SBC revenue requirements by $23.7 million, which was recorded as a decrease to Regulatory assets on the accompanying unaudited condensed consolidated balance sheet.  We expect a decision in this docket from the DPUC by the end of 2010 and do not expect the outcome to have a material adverse impact on CL&P’s earnings, financial position or cash flows.

Procurement Fee Rate Proceedings: In prior years, CL&P submitted to the DPUC its proposed methodology to calculate the variable

incentive portion of its transition service procurement fee, which was effective for the years 2004, 2005 and 2006, and requested approval of the pre-tax $5.8 million 2004 incentive fee.  CL&P has not recorded amounts related to the 2005 or 2006 procurement fee in earnings.  CL&P recovered the $5.8 million pre-tax amount, which was recorded in 2005 earnings, through the CTA reconciliation process.  On January 15, 2009, the DPUC issued a final decision in this docket reversing its December 2005 draft decision and stated that CL&P was not eligible for the procurement incentive compensation for 2004.  A $5.8 million pre-tax charge (approximately $3.5 million net of tax) was recorded in the 2008 earnings of CL&P, and an obligation to refund the $5.8 million to customers was established as of December 31, 2008.  CL&P filed an appeal of this decision on February 26, 2009.  On F ebruary 4, 2010, the Connecticut Superior Court reversed the DPUC decision.  The Court remanded the case back to the DPUC for the correction of several specific errors.  On February 22, 2010, the DPUC appealed the Connecticut Superior Court's February 4, 2010 decision to the Connecticut Appellate Court.  A procedural schedule has not been finalized for the DPUC's appeal to the Appellate Court.

New Hampshire:

Merrimack Clean Air Project:  On July 7, 2009, the New Hampshire Site Evaluation Committee determined that PSNH’s Clean Air Project to install wet scrubber technology at its Merrimack Station was not subject to the Committee’s review as a "sizeable" addition to a power plant under state law.  That Committee upheld its decision in an order dated January 15, 2010, denying requests for rehearing.  This order was appealed on February 23, 2010.  On April 15, 2010, the New Hampshire Supreme Court determined that it would accept the appeal, but has not established a procedural schedule for the appeal.  We do not believe that the appeal will have a material impact on the timing or costs of the project.  PSNH is continuing with construction of this project and has capitalized $178.8 million since inception of the project through March 31, 2010 as of which date construction was app roximately 51 percent complete.  

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Distribution Rates:  The NHPUC issued an order on July 31, 2009 approving a temporary increase of $25.6 million in PSNH’s distribution rates on an annualized basis, effective August 1, 2009.  Included in the $25.6 million temporary increase is $6 million to begin the recovery of PSNH's approximately $49 million deferral of storm costs incurred in December 2008.  

On June 30, 2009, PSNH filed an application with the NHPUC requesting a permanent increase in distribution rates of approximately $51 million on an annualized basis to be effective August 1, 2009, and another $17 million to be effective July 1, 2010.  On April 30, 2010, PSNH, the NHPUC staff and the Office of Consumer Advocate submitted a proposed settlement of the rate case PSNH had filed on June 30, 2009 with the NHPUC.  Under the proposed settlement, the settling parties agreed to a net distribution rate increase of $45.5 million on an annualized basis to be effective July 1, 2010, and annualized distribution rate adjustments projected at negative $2.9 million, and positive $9.5 million and $11.1 million on July 1 of each of the three subsequent years, respectively.  The $45.5 million increase is in addition to the $25.6 million temporary increase that became effective August 1, 2009.  The $45.5 million increa se includes $13.7 million to reconcile the difference between the temporary rates and the permanent rates back to August 1, 2009.  The projected decrease of $2.9 million on July 1, 2011 reflects primarily the end of the recoupment of the $13.7 million reconciliation on that date.  PSNH also agreed not to file a new distribution rate case until June 30, 2015.  During the term of the settlement, PSNH’s ability to propose changes to its permanent distribution rate level will be limited to situations where its 12-month distribution ROE falls below 7 percent for two consecutive quarters or certain specified external events occur, as defined in the settlement.  Another provision of the settlement was that the authorized regulatory ROE on distribution only plant continues at the previously allowed level of 9.67 percent.  A decision by the NHPUC is expected in June 2010.  Any differences between allowed temporary rates and permanent rates will be reconciled back to August  1, 2009.  

ES and SCRC Reconciliation:  On an annual basis, PSNH files with the NHPUC an ES/SCRC reconciliation filing for the preceding year.  On April 30, 2010, PSNH filed its 2009 ES/SCRC reconciliation with the NHPUC, whose evaluation includes a prudence review of PSNH's generation activities.  During 2009 ES costs exceeded ES revenues by $45.9 million, as a result of refunding the 2008 ES regulatory obligation to customers through a lower ES rate.  During 2009, SCRC revenues exceeded SCRC costs by $6.4 million.  As of December 31, 2009 PSNH had an ES regulatory asset and a SCRC regulatory asset of $4.4 million and $3.9 million, respectively, for costs that are included in the 2010 ES/SCRC rate calculations for recovery from customers.  We do not expect the outcome of the NHPUC review to have a material adverse impact on PSNH’s earnings, financial position or cash flows.  

Massachusetts:  

Customer Rates:  WMECO intends to file a distribution rate case in mid-2010 to be effective in early 2011, which will be preceded by a letter of intent.  The distribution rate case will include a proposal, as required by the DPU, to fully decouple distribution revenues from KWh sales.

Basic Service Rates:  Effective January 1, 2010, the rates for all basic service customers changed to reflect the basic service solicitations conducted by WMECO in November 2009.  Basic service rates for residential customers decreased to 8.257 cents per KWh, rates for small commercial and industrial customers decreased to 8.992 cents per KWh.  Effective April 1, 2010, the basic service rate for medium and large commercial and industrial customers decreased to 8.528 cents per KWh to reflect the basic service solicitation conducted by WMECO in February 2010.

Pension Factor Reconciliation Filing:  On July 2, 2009, WMECO filed the 2008 reconciliation for its pension factor revenues and expenses.  An evidentiary hearing was held on March 26, 2010 and briefs will be filed in May 2010.  There is no date set for when the DPU will render its final decision.  We do not expect the outcome of the DPU's review of this filing to have a material adverse impact on WMECO's earnings, financial position or cash flows.

NU Enterprises Divestitures

We have exited most of our competitive businesses.  NU Enterprises continues to manage to completion its remaining wholesale marketing contracts and to manage its electrical contracting business.

Off-Balance Sheet Arrangements

Letters of Credit:  NU parent provides standby LOCs for the benefit of its subsidiaries under its revolving credit agreement.  PSNH posts such LOCs as collateral with counterparties and ISO-NE.  As of March 31, 2010, PSNH had posted $47.6 million in such NU parent LOCs, which includes $10 million with ISO-NE.  In addition, Select Energy had posted $2 million NU parent LOCs with ISO-NE as of March 31, 2010.

Competitive Businesses:  We have various guarantees and indemnification obligations outstanding on behalf of former subsidiaries in connection with the exit from our competitive businesses.  See Note 4B, "Commitments and Contingencies - Guarantees and Indemnifications," to the unaudited condensed consolidated financial statements for information regarding the maximum exposure and amounts recorded under these guarantees and indemnification obligations.

Critical Accounting Policies and Estimates Update

The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and at times difficult, subjective or complex judgments.  Changes in these estimates, assumptions and judgments, in and of themselves, could

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materially impact our financial position, results of operations or cash flows.  Our management communicates to and discusses with our Audit Committee of the Board of Trustees all critical accounting policies and estimates.  The accounting policies and estimates that we believed were the most critical in nature were reported in our 2009 Form 10-K.  There have been no material changes with regard to these critical accounting policies and estimates.  

Other Matters

Contractual Obligations and Commercial Commitments:  There have been no additional contractual obligations identified and no material changes with regard to the contractual obligations and commercial commitments previously disclosed in our 2009 Form 10-K.

Web Site:  Additional financial information is available through our web site at www.nu.com.

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RESULTS OF OPERATIONS – NORTHEAST UTILITIES AND SUBSIDIARIES

The following table provides the variances in income statement line items for the unaudited condensed consolidated statements of income for NU included in this Quarterly Report on Form 10-Q for the three months ended March 31, 2010:

	Income Statement Variances (Millions of Dollars) 2010 over/(under) 2009
	Amount		Percent
Operating Revenues	$	(254)	(16)	%
Operating Expenses:
Fuel, purchased and net interchange power		(236)	(28)
Other operating expenses		1	-
Maintenance		(3)	(7)
Depreciation		2	2
Amortization of regulatory (liabilities)/assets, net		(30)	(a)
Amortization of rate reduction bonds		4	7
Taxes other than income taxes		(1)	(1)
Total operating expenses		(263)	(19)
Operating Income		9	4
Interest expense		(4)	(5)
Other income, net		4	93
Income before income tax expense		17	11
Income tax expense		28	55
Net income		(11)	(12)
Preferred dividends of subsidiary		-	-
Net income attributable to controlling interest	$	(11)	(12)	%

(a)

Percent greater than 100 not shown since not meaningful.

Comparison of the First Quarter of 2010 to the First Quarter of 2009

Operating Revenues

	For the Three Months Ended March 31,
(Millions of Dollars)	2010		2009		Variance
Electric distribution	$	1,000	$	1,246	$	(246)
Gas distribution		172		202		(30)
Total distribution		1,172		1,448		(276)
Transmission		153		134		19
Regulated companies		1,325		1,582		(257)
Competitive businesses		19		20		(1)
Other & eliminations		(5)		(9)		4
NU	$	1,339	$	1,593	$	(254)

Operating revenues decreased $254 million in 2010 due primarily to lower distribution revenues from the Regulated companies ($276 million) mainly as a result of the recovery of a lower level of electric and gas distribution fuel and other expenses passed through to customers through regulatory tracking mechanisms.  

Electric distribution revenues decreased $246 million due primarily to a decrease in the portion of electric distribution revenues that does not impact earnings ($235 million) and a decrease in the component of revenues that impacts earnings ($11 million).  The portion of electric distribution segment revenues that impacts earnings decreased $11 million due primarily to lower retail electric sales, partially offset by CL&P's rate changes effective in February 2009 and PSNH's rate changes effective in August 2009.  Retail electric sales for the Regulated companies decreased 4.9 percent.  Gas distribution revenues decreased $30 million due primarily to decreased recovery of fuel costs primarily as a result of lower sales volumes.  Firm natural gas sales decreased 3.5 percent in the first quarter of 2010 compared with the same period of 2009.

The $235 million decrease in electric distribution revenues that does not impact earnings consists of the portions of distribution revenues that are included in regulatory commission approved tracking mechanisms that recover certain incurred costs ($225 million) and revenues that are eliminated in consolidation of the Regulated companies ($10 million).  The distribution revenue tracking components decreased $225 million due primarily to lower recovery of generation service and related congestion charges ($211 million) and lower CL&P delivery-related FMCC ($17 million).  The tracking mechanisms allow for rates to be changed periodically with overcollections refunded to customers or undercollections to be recovered from customers in future periods.

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Transmission segment revenues increased $19 million due primarily to the return on a higher transmission investment base and the return of higher overall expenses, which are tracked and result in a related increase in revenues, resulting from an increase in transmission plant, such as higher property taxes, depreciation and operation and maintenance expenses.  

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power expenses decreased $236 million in 2010 due primarily to lower costs at the Regulated companies ($242 million), partially offset by higher competitive business expenses ($6 million).  Fuel and purchased power expense for the Regulated companies decreased at CL&P ($152 million) due to lower GSC supply costs and other purchased power costs, partially offset by an increase in deferred fuel costs, at PSNH ($42 million) due to an increased level of migration of ES customers to competitive electric supplier and lower retail sales, at Yankee Gas ($28 million) due to lower volumes in 2010 as compared to 2009, and at WMECO ($20 million) due to lower basic/default service supply costs.  Competitive businesses’ expenses increased due to Select Energy mark-to-market losses in 2010 as a result of changes in power prices across the forward price curve, as compared to a gain in 2009 related t o the remaining wholesale marketing contracts.

Other Operating Expenses

Other operating expenses increased $1 million in 2010 due primarily to higher NU parent and other companies expenses ($2 million) and higher Regulated companies' distribution and transmission segment expenses ($1 million), partially offset by lower competitive businesses' expenses ($2 million).

NU parent and other companies expenses were higher due primarily to an increase to environmental reserves at HWP Company ($1 million) and higher pension expense attributable to retirees at NAESCO.  Competitive businesses' expenses were lower by $2 million due primarily to lower Boulos expenses as a result of a lower level of work.  Higher Regulated companies' distribution and transmission segment expenses of $1 million were due primarily to higher electric distribution segment expenses ($5 million) including higher pension costs, and higher other operating costs ($4 million), partially offset by lower costs that are recovered through distribution tracking mechanisms that have no earnings impact ($9 million) such as customer services expenses and retail transmission.  

Maintenance

Maintenance expenses decreased $3 million in 2010 due primarily to lower Regulated companies' distribution expenses ($5 million), partially offset by higher transmission line expenses ($2 million).  Distribution expenses were lower due primarily to the timing of vegetation management work ($6 million), partially offset by higher repair and maintenance of distribution lines ($1 million).  

Depreciation

Depreciation expenses increased $2 million in 2010 due primarily to higher transmission ($1 million) and distribution ($1 million) plant balances resulting from completed construction projects placed into service.

Amortization of Regulatory (Liabilities)/Assets, Net

Amortization of regulatory (liabilities)/assets, net decreased $30 million in 2010 primarily as a result of the impact of the 2010 Healthcare Act related to the write-off of previously recorded deferred tax assets that we believe are probable of recovery in future electric and natural gas distribution rates ($24 million).  

Amortization of Rate Reduction Bonds

Amortization of RRBs expenses increased $4 million in 2010, which corresponded to the reduction in principal of the RRBs.  

Taxes Other than Income Taxes

Taxes other than income taxes expenses decreased $1 million in 2010 due primarily to lower payroll related taxes.  

Interest Expense

Interest expense decreased $4 million in 2010 due primarily to lower RRB interest resulting from lower principal balances outstanding ($4 million) and lower other interest ($1 million), partially offset by higher long-term debt interest ($2 million) resulting from the issuance of new long-term debt in 2009.

Other Income, Net

Other income, net increased $4 million in 2010 due primarily to the absence of investment losses recorded in 2009 and higher investment income due primarily to improved results from NU’s supplemental benefit trust ($5 million), and higher AFUDC equity income ($2 million) as a result of higher eligible CWIP balances and lower short-term debt, partially offset by lower CL&P Energy Independence Act incentives ($2 million).  

Income Tax Expense

Income tax expense increased $28 million due primarily to the impacts of the 2010 Healthcare Act including $18 million from writing down deferred tax assets, $9 million as a result of establishing a 2010 Healthcare Act related regulatory asset and lower tax benefits for the three months ended March 31, 2010.  

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RESULTS OF OPERATIONS - THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES

The components of significant income statement variances, higher/(lower) in comparison to the previous year, are provided in the table below.

Income Statement Variances	2010 versus 2009
(Millions of Dollars)	Amount		Percent
Operating Revenues	$	(160)	(17)	%
Operating Expenses:
Fuel, purchased and net interchange power		(152)	(29)
Other operating expenses		(5)	(3)
Maintenance		(5)	(19)
Depreciation		1	2
Amortization of regulatory (liabilities)/assets, net		(11)	(87)
Amortization of rate reduction bonds		3	7
Taxes other than income taxes		(1)	(1)
Total operating expenses		(170)	(20)
Operating Income		10	9
Interest expense		1	2
Other income, net		2	82
Income before income tax expense		11	14
Income tax expense		16	59
Net Income	$	(5)	(9)	%

Comparison of the First Quarter of 2010 to the First Quarter of 2009

Operating Revenues

Operating revenues decreased $160 million in 2010 due to lower distribution segment revenues ($173 million), partially offset by higher transmission segment revenues ($13 million).

The distribution segment revenues decreased $173 million due primarily to a decrease in the portion of distribution revenues that does not impact earnings ($162 million).  The portion of revenues that impacts earnings decreased $11 million primarily as a result of lower retail sales, partially offset by rate changes effective in February 2009.  The 2010 retail sales as compared to the same period in 2009 decreased 4.9 percent.

The $162 million decrease in distribution segment revenues that do not impact earnings was due primarily to a decrease in the portions of retail revenues that are included in DPUC approved tracking mechanisms that track the recovery of certain incurred costs through CL&P's tariffs ($155 million) and transmission segment intracompany billings to the distribution segment that are eliminated in consolidation ($6 million).  The distribution revenues included in DPUC approved tracking mechanisms decreased $155 million due primarily to a decrease in revenues associated with the recovery of GSC and supply-related FMCC ($138 million), and delivery-related FMCC ($17 million).  The lower GSC and supply-related FMCC revenue was due primarily to lower retail sales, lower customer rates resulting from lower average supply prices and additional customer migration to third-party suppliers in 2010 as compared to 2009.  The lower deliv ery-related FMCC revenue was due primarily to changes in projections for certain delivery-related FMCC costs for 2010 that significantly lowered the delivery-related FMCC rate in the first quarter of 2010 as compared to 2009.  The tracking mechanisms allow for rates to be changed periodically with overcollections refunded to customers or undercollections to be recovered from customers in future periods.

Transmission segment revenues increased $13 million due primarily to the return on a higher transmission investment base and the return of higher overall expenses, which are tracked and result in a related increase in revenues, resulting from an increase in transmission plant such as higher property taxes, depreciation, and operation and maintenance expenses.  

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power expense decreased $152 million in 2010 due primarily to lower GSC supply costs ($169 million) and other purchased power costs ($6 million), partially offset by an increase in deferred fuel costs ($23 million), all of which are included in DPUC approved tracking mechanisms.  The $169 million decrease in GSC supply costs was due primarily to lower retail sales, lower average supply prices, and additional customer migration to third-party suppliers in 2010 as compared to 2009.  These GSC supply costs are the contractual amounts CL&P must pay to various suppliers that have been awarded the right to supply SS and LRS load through a competitive solicitation process.  The $23 million increase in deferred fuel costs was due primarily to a smaller net underrecovery in the first quarter of 2010 as compared to 2009.  

Other Operating Expenses

Other operating expenses decreased $5 million in 2010 as a result of lower costs that are recovered through distribution tracking mechanisms and have no earnings impact ($8 million) such as certain customer services expenses ($6 million), and retail transmission ($3 million), partially offset by higher distribution segment expenses ($3 million), including higher pension costs.

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Maintenance

Maintenance expenses decreased $5 million in 2010 due primarily to lower repair and maintenance of distribution lines ($7 million), including lower storm expenses, partially offset by higher transmission segment expenses ($2 million).  CL&P storm expenses incurred resulting from the March 2010 severe storm with high winds will be recovered through a combination of insurance proceeds, customer-funded reserves that are established for the purpose of recovering major storm costs, and current distribution revenues.  These costs did not result in a significant maintenance variance when compared to storm costs incurred in the same period last year.  

Depreciation

Depreciation expense increased $1 million in 2010 due primarily to higher utility plant balances resulting from completed construction projects placed into service.

Amortization of Regulatory (Liabilities)/Assets, Net

Amortization of regulatory (liabilities)/assets, net, decreased $11 million in 2010 primarily as a result of the impact of the 2010 Healthcare Act related to income taxes ($14 million), partially offset by higher amortization of the SBC balance ($3 million).

Amortization of Rate Reduction Bonds

Amortization of RRBs increased $3 million in 2010, which corresponded to the reduction in principal of the RRBs.  

Taxes Other Than Income Taxes

Taxes other than income taxes decreased $1 million in 2010 due primarily to lower taxes paid in 2010 to the Town of Waterford for lost property tax revenue as a result of the sale of Millstone ($4 million), and lower payroll taxes ($1 million), partially offset by higher property taxes ($3 million), and higher gross earnings taxes ($1 million) recoverable in rates mainly as a result of higher transmission revenues that are subject to gross earnings tax.

Interest Expense

Interest expense increased $1 million in 2010 due primarily to higher long-term debt interest ($2 million) resulting from the $250 million debt issuance in February 2009, and other interest ($2 million) mostly related to the absence of the resolution of routine tax issues, partially offset by lower RRB interest resulting from lower principal balances outstanding ($3 million).

Other Income, Net

Other income, net, increased $2 million in 2010 due primarily to higher investment income due primarily to improved results from NU’s supplemental benefit trust and the absence of investment losses recorded in 2009 ($3 million), higher AFUDC equity income ($1 million) as a result of higher eligible CWIP balances and lower short-term debt and higher interest income ($1 million), partially offset by lower CL&P Energy Independence Act incentives ($2 million).  

Income Tax Expense

Income tax expense increased $16 million in 2010 due primarily to the impacts of the 2010 Healthcare Act; including $9 million from writing down deferred tax assets, $6 million as a result of establishing the 2010 Healthcare Act related regulatory asset and lower tax benefits for the three months ended March 31, 2010.  

LIQUIDITY

CL&P had cash flows provided by operating activities in the first quarter of 2010 of $73.2 million, compared with operating cash flows of $74.1 million in the first quarter of 2009 (amounts are net of RRB payments, which are included in financing activities).  The slight decrease in cash flows was due primarily to an increase in income tax payments largely attributable to the absence of bonus depreciation tax deductions under the American Recovery and Reinvestment Act of 2009 in the first quarter of 2010.  Bonus depreciation tax deductions expired at the end of 2009.  Offsetting the tax payments was a decrease in payments made related to our accounts payable in support of our operating activities and our accounts payable related to the March 2010 unpaid major storm costs.  We project cash flows provided by operating activities at CL&P of approximately $400 million in 2010, net of RRB payments, which is $40 mil lion lower than our previous projections due primarily to recent CTA cost underrecoveries charge (which does not impact earnings) and the severe storm costs spent in 2010 to be recovered in future periods.

As of March 31, 2010, CL&P had no borrowings under the $400 million credit facility it shares with the other Regulated companies, under which it can borrow up to $200 million.  Other financing activities for the three months ended March 31, 2010 included $35.8 million in common dividends paid to NU parent.  

On April 1, 2010, CL&P remarketed $62 million of tax-exempt PCRBs that were subject to a mandatory tender on April 1, 2010.  The PCRBs, which mature on May 1, 2031, carry a coupon rate of 1.4 percent and have a mandatory tender on April 1, 2011, at which time CL&P expects to remarket the bonds.

Cash capital expenditures included on the accompanying unaudited condensed consolidated statements of cash flows do not include amounts incurred on capital projects but not yet paid, cost of removal, the AFUDC related to equity funds, and the capitalized portions of pension and PBOP expense or income.  CL&P's cash capital expenditures totaled $97.7 million for the three months ended March 31, 2010, compared with $116.3 million for the three months ended March 31, 2009.  We project capital expenditures at CL&P of $441 million in 2010 (including non-cash factors).  

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RESULTS OF OPERATIONS - PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

The components of significant income statement variances, higher/(lower) in comparison to the previous year, are provided in the table below.

Income Statement Variances	2010 versus 2009
(Millions of Dollars)	Amount		Percent
Operating Revenues	$	(49)	(16)	%
Operating Expenses:
Fuel, purchased and net interchange power		(42)	(29)
Other operating expenses		-	-
Maintenance		-	-
Depreciation		1	5
Amortization of regulatory (liabilities)/assets, net		(14)	(a)
Amortization of rate reduction bonds		1	6
Taxes other than income taxes		1	7
Total operating expenses		(53)	(19)
Operating Income		4	11
Interest expense		-	-
Other income, net		1	69
Income before income tax expense		5	20
Income tax expense		7	88
Net Income	$	(2)	(10)	%

(a)

Percent greater than 100 not shown since not meaningful.  

Comparison of the First Quarter of 2010 to the First Quarter of 2009

Operating Revenues

Operating revenues decreased $49 million in 2010 due to lower distribution segment revenues ($52 million), partially offset by higher transmission segment revenues ($3 million).

The distribution segment revenues decreased $52 million due primarily to a decrease in the portion of distribution revenues that do not impact earnings ($54 million).  The portion of revenues that impacts earnings increased $2 million primarily as a result of the retail rate increase effective in August 2009, partially offset by lower retail sales volumes.  Retail sales decreased 5.3 percent in 2010 compared to the same period in 2009.  

The $54 million decrease in the portion of distribution segment revenues that do not impact earnings was due primarily to a decrease in the portions of retail revenues that are included in NHPUC approved tracking mechanisms that track the recovery of certain incurred costs through PSNH’s tariffs ($52 million) and transmission segment intracompany billings to the distribution segment that are eliminated in consolidation ($2 million).  The distribution revenues included in NHPUC approved tracking mechanisms decreased $52 million due primarily to lower recovery of purchased fuel and power costs ($54 million), lower Northern Wood Power Plant renewable energy certificate revenues ($3 million) and lower wholesale revenue ($1 million), partially offset by higher retail transmission revenues ($4 million) and an increase in the SCRC ($3 million).  The tracking mechanisms allow for rates to be changed periodically with overcollectio ns refunded to customers or undercollections to be recovered from customers in future periods.

Transmission segment revenues increased $3 million due primarily to the return on a higher transmission investment base and the return of higher overall expenses, which are tracked and result in a related increase in revenues, resulting from an increase in transmission plant such as higher property taxes, depreciation and operation and maintenance expenses.

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power costs decreased $42 million in 2010 due primarily to an increased level of migration of ES customers to competitive electric suppliers and lower retail sales.

Depreciation

Depreciation expense increased $1 million in 2010 due primarily to higher utility plant balances resulting from completed construction projects placed into service in the transmission and distribution segments.

Amortization of Regulatory (Liabilities)/Assets, Net

Amortization of regulatory (liabilities)/assets, net expense decreased $14 million in 2010 due primarily to a decrease in net deferrals associated with the ES ($10 million) and SCRC ($1 million) tracking mechanisms and the impact of the 2010 Healthcare Act related to income taxes ($5 million), partially offset by an increase in net deferrals associated with the TCAM tracking mechanism ($2 million).

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Amortization of Rate Reduction Bonds

Amortization of RRBs expense increased $1 million in 2010, which corresponded to the reduction in principal of the RRBs.  

Taxes Other Than Income Taxes

Taxes other than income taxes expenses increased $1 million in 2010 due primarily to higher property taxes as a result of higher net plant balances and increased local municipal tax rates.

Other Income, Net

Other income, net, increased $1 million in 2010 due primarily to higher AFUDC equity income as a result of higher eligible CWIP balances and the absence of investment losses recorded in 2009 on NU's supplemental benefit trust.

Income Tax Expense

Income tax expense increased $7 million in 2010 due primarily to the impacts of the 2010 Healthcare Act; including $4 million from writing down deferred tax assets and $2 million as a result of establishing a 2010 Healthcare Act related regulatory asset.  

LIQUIDITY

PSNH had cash flows provided by operating activities in the first quarter of 2010 of $60.7 million, compared with operating cash flows of $0.8 million in the first quarter of 2009 (amounts are net of RRB payments, which are included in financing activities).  The improved cash flows were due primarily to the absence in 2010 of costs related to the major storm in December 2008 that were paid to vendors in the first quarter of 2009 and an increase in cash flow benefits from accounts payable related to the February 2010 unpaid major storm costs.  The December 2008 major storm costs are currently recovered from customers at an annual rate of $6 million, beginning August 1, 2009, pursuant to the temporary distribution rate case settlement.  This level of recovery could be modified once PSNH's permanent distribution rate case is decided in mid-2010.  Offsetting this favorable cash flow impact was an increase in income tax payments largely attributable to the absence of bonus depreciation tax deductions under the American Recovery and Reinvestment Act of 2009 in the first quarter of 2010.  Bonus depreciation tax deductions expired at the end of 2009.

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RESULTS OF OPERATIONS – WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

The components of significant income statement variances, higher/(lower) in comparison to the previous year, are provided in the table below.

Income Statement Variances	2010 versus 2009
(Millions of Dollars)	Amount		Percent
Operating Revenues	$	(18)	(15)	%
Operating Expenses:
Fuel, purchased and net interchange power		(20)	(31)
Other operating expenses		1	2
Maintenance		2	46
Depreciation		-	-
Amortization of regulatory (liabilities)/assets, net		(2)	(a)
Amortization of rate reduction bonds		-	-
Taxes other than income taxes		-	-
Total operating expenses		(19)	(18)
Operating Income		1	7
Interest expense		-	-
Other income/(loss), net		1	(a)
Income before income tax expense		2	22
Income tax expense		2	70
Net Income	$	-	-	%

(a) Percent greater than 100 not shown since not meaningful.

Comparison of the First Quarter of 2010 to the First Quarter of 2009

Operating Revenues

Operating revenues decreased $18 million in 2010 due to lower distribution segment revenues ($21 million), partially offset by higher transmission segment revenues ($3 million).

The distribution segment revenues decreased $21 million due primarily to a decrease in the portion of distribution revenues that does not impact earnings ($19 million).  The portion of revenues that impacts earnings decreased $2 million.  The 2010 retail sales as compared to the same period in 2009 decreased 4.4 percent.

The $19 million distribution segment revenues decrease that do not impact earnings was due primarily to a decrease in the portions of retail revenues that are included in DPU approved tracking mechanisms that track the recovery of certain incurred costs through WMECO's tariffs ($17 million) and transmission segment intracompany billings to the distribution segment that are eliminated in consolidation ($2 million).  The distribution revenues included in DPU approved tracking mechanisms decreased $17 million due primarily to lower recovery of energy supply costs ($19 million), partially offset by higher transition cost recoveries ($2 million).  The tracking mechanisms allow for rates to be changed periodically with overcollections refunded to customers or undercollections to be recovered from customers in future periods.

Transmission segment revenues increased $3 million due primarily to the return on a higher transmission investment base and the return of higher overall expenses, which are tracked and result in a related increase in revenues, resulting from an increase in transmission plant such as higher property taxes, depreciation, and operation and maintenance expenses.

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power expense decreased $20 million in 2010 due primarily to lower basic/default service supply costs.  The basic/default service supply costs are the contractual amounts we must pay to various suppliers that serve this load after winning a competitive solicitation process.  These costs decreased due primarily to lower supplier contract rates in addition to reduced load volumes.  

Other Operating Expenses

Other operating expenses increased $1 million in 2010 as a result of higher distribution segment expenses mainly as a result of higher administrative and general expenses, including higher pension costs.

Maintenance

Maintenance expenses increased $2 million in 2010 due primarily to higher storm related expenses.  

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Amortization of Regulatory (Liabilities)/Assets, Net

Amortization of regulatory (liabilities)/assets, net, decreased $2 million in 2010 primarily as a result of the impact of the 2010 Healthcare Act related to income taxes.  

Other Income/(Loss), Net

Other income/(loss), net, increased $1 million in 2010 due primarily to higher investment income due primarily to improved results from NU’s supplemental benefit trust and the absence of investment losses recorded in 2009.

Income Tax Expense

Income tax expense increased $2 million in 2010 due primarily to the impacts of the 2010 Healthcare Act.  

LIQUIDITY

WMECO had cash flows provided by operating activities in the first quarter of 2010 of $4.8 million, compared with cash flows used in operating activities of $11.6 million in the first quarter of 2009 (amounts are net of RRB payments, which are included in financing activities).  The improved cash flows in 2010 were due primarily to the absence in 2010 of costs related to the major storm in December 2008 that were paid to vendors in the first quarter of 2009.  These costs were deferred and are expected to be recovered from customers.  WMECO anticipates filing a distribution rate case in mid-2010, which would include a request for more timely recovery of the December 2008 storm costs.  Offsetting this favorable cash flow impact was an increase in income tax payments largely attributable to the absence of bonus depreciation tax deductions under the American Recovery and Reinvestment Act of 2009 in the first quarter of 2010.  Bonus depreciation tax deductions expired at the end of 2009.  

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Information

Commodity Price Risk Management:  Our Regulated companies enter into energy contracts to serve our customers and the economic impacts of those contracts are passed on to our customers.  Accordingly, the Regulated companies have no exposure to loss of future earnings or fair values due to these market risk-sensitive instruments.  The wholesale portfolio held by Select Energy includes contracts that are market-risk sensitive, including a wholesale energy sales contract through 2013 with an agency comprised of municipalities with approximately 0.4 million remaining MWh of supply contract volumes, net of related sales volumes.  Select Energy also has a non-derivative energy contract that expires in mid-2012 to purchase output from a generation facility, which is less exposed to market price volatility.  As Select Energy's contract volumes are winding down, and as the wholesale energy sales contract is s ubstantially hedged against price risks, we have limited exposure to commodity price risks.  We have no energy contracts entered into for trading purposes.

Sensitivity analysis provides a presentation of the potential loss of future pre-tax earnings and fair values from our market risk-sensitive contracts due to one or more hypothetical changes in commodity price components, or other similar price changes.  We have provided this analysis in Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," in our 2009 Form 10-K, which disclosures are incorporated herein by reference.  There have been no additional market or commodity price risks identified and no material changes with regard to the sensitivity analysis previously disclosed in our 2009 Form 10-K.

Other Risk Management Activities

Interest Rate Risk Management: We manage our interest rate risk exposure in accordance with our written policies and procedures by maintaining a mix of fixed and variable rate long-term debt.  

Credit Risk Management: Credit risk relates to the risk of loss that we would incur as a result of non-performance by counterparties pursuant to the terms of our contractual obligations.  We serve a wide variety of customers and suppliers that include IPPs, industrial companies, gas and electric utilities, oil and gas producers, financial institutions, and other energy marketers.  Margin accounts exist within this diverse group, and we realize interest receipts and payments related to balances outstanding in these margin accounts.  This wide customer and supplier mix generates a need for a variety of contractual structures, products and terms that, in turn, require us to manage the portfolio of market risk inherent in those transactions in a manner consistent with the parameters established by our risk management process.

We have provided additional disclosures regarding interest rate risk management and credit risk management in Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," in our 2009 Form 10-K, which are incorporated herein by reference. There have been no additional risks identified and no material changes with regard to the items previously disclosed in our 2009 Form 10-K.

For further information on cash collateral deposited and posted with counterparties as well as any cash collateral netted against the fair value of the related derivative contracts, see Note 1H, "Summary of Significant Accounting Policies - Special Deposits and Counterparty Deposits," and Note 2, “Derivative Instruments,” to the unaudited condensed consolidated financial statements.  Additional quantitative and qualitative disclosures about market risk are set forth in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in this Quarterly Report on Form 10-Q.

ITEM 4.

CONTROLS AND PROCEDURES

Management, on behalf of NU, CL&P, PSNH, and WMECO, evaluated the design and operation of the disclosure controls and procedures as of March 31, 2010 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 officers and principal financial officer have concluded, based on their review, that the disclosure controls and procedures of NU, CL&P, PSNH, and WMECO are effective to ensure that information required to be disclosed by us 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 officers and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

There have been no changes in internal controls over financial reporting for NU, CL&P, PSNH, and WMECO during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.

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PART II.  OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are parties to various legal proceedings.  We have identified these legal proceedings in Part I, Item 3, "Legal Proceedings," and elsewhere in our 2009 Form 10-K, which disclosures are incorporated herein by reference.  There have been no additional legal proceedings identified and no material changes with regard to the legal proceedings previously disclosed in our 2009 Form 10-K.

ITEM 1A.

RISK FACTORS

We are subject to a variety of significant risks in addition to the matters set forth under "Forward Looking Statements," in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Quarterly Report on Form 10-Q.  We have identified a number of these risk factors in Item 1A, "Risk Factors," in our 2009 Form 10-K, which risk factors are incorporated herein by reference.  These risk factors should be considered carefully in evaluating our risk profile.  There have been no additional risk factors identified and no material changes with regard to the risk factors previously disclosed in our 2009 Form 10-K.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no purchases made by or on behalf of NU or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934) of NU common shares during the quarter ended March 31, 2010.

71

ITEM 6.

EXHIBITS

Each document described below is incorporated by reference by the registrant(s) listed to the files identified, unless designated with a (*), which exhibits are filed herewith.  

Exhibit No.

Description

Listing of Exhibits (NU)

*10

Tenth Supplemental Indenture of Mortgage dated as of April 1, 2010 between Yankee Gas Services Company and the Bank of New York Mellon Trust Company, as Trustee

*12

Ratio of Earnings to Fixed Charges

*15

Deloitte & Touche LLP Letter Regarding Unaudited Financial Information

*31

Certification of Charles W. Shivery, Chairman, President and Chief Executive Officer of Northeast Utilities, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2010

*31.1

Certification of David R. McHale, Executive Vice President and Chief Financial Officer of Northeast Utilities, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2010

*32

Certification of Charles W. Shivery, Chairman, President and Chief Executive Officer of Northeast Utilities and David R. McHale, Executive Vice President and Chief Financial Officer of Northeast Utilities, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 7, 2010

Listing of Exhibits (CL&P)

*12

Ratio of Earnings to Fixed Charges

*31

Certification of Leon J. Olivier, Chief Executive Officer of The Connecticut Light and Power Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2010

*31.1

Certification of David R. McHale, Executive Vice President and Chief Financial Officer of The Connecticut Light and Power Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, May 7, 2010

*32

Certification of Leon J. Olivier, Chief Executive Officer of The Connecticut Light and Power Company and David R. McHale, Executive Vice President and Chief Financial Officer of The Connecticut Light and Power Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 7, 2010

Listing of Exhibits (PSNH)

*12

Ratio of Earnings to Fixed Charges

*31

Certification of Leon J. Olivier, Chief Executive Officer of Public Service Company of New Hampshire, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2010

*31.1

Certification of David R. McHale, Executive Vice President and Chief Financial Officer of Public Service Company of New Hampshire, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2010

72

*32

Certification of Leon J. Olivier, Chief Executive Officer of Public Service Company of New Hampshire and David R. McHale, Executive Vice President and Chief Financial Officer of Public Service Company of New Hampshire, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 7, 2010

Listing of Exhibits (WMECO)

4.

Instruments defining the rights of security holders, including indentures

4.1

Fifth Supplemental Indenture between WMECO and The Bank of New York Mellon Trust Company , N.A., as Trustee, dated as of  March 1, 2010 (Exhibit 4.1, WMECO Current Report on Form 8-K filed March 10, 2010, File No. 000-07624)

*12

Ratio of Earnings to Fixed Charges

*31

Certification of Leon J. Olivier, Chief Executive Officer of Western Massachusetts Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2010

*31.1

Certification of David R. McHale, Executive Vice President and Chief Financial Officer of Western Massachusetts Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2010

*32

Certification of Leon J. Olivier, Chief Executive Officer of Western Massachusetts Electric Company and David R. McHale, Executive Vice President and Chief Financial Officer of Western Massachusetts Electric Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 7, 2010

73

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 hereunto duly authorized.  

		NORTHEAST UTILITIES
		(Registrant)
Date:  May 7, 2010	By	/s/ David R. McHale
		David R. McHale
		Executive Vice President and Chief Financial Officer
		(for the Registrant and as Principal Financial Officer)

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 hereunto duly authorized.  

		THE CONNECTICUT LIGHT AND POWER COMPANY
		(Registrant)
Date:  May 7, 2010	By	/s/ David R. McHale
		David R. McHale
		Executive Vice President and Chief Financial Officer
		(for the Registrant and as Principal Financial Officer)

74

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 hereunto duly authorized.

		PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
		(Registrant)
Date:  May 7, 2010	By	/s/ David R. McHale
		David R. McHale
		Executive Vice President and Chief Financial Officer
		(for the Registrant and as Principal Financial Officer)

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 hereunto duly authorized.  

		WESTERN MASSACHUSETTS ELECTRIC COMPANY
		(Registrant)
Date:  May 7, 2010	By	/s/ David R. McHale
		David R. McHale
		Executive Vice President and Chief Financial Officer
		(for the Registrant and as Principal Financial Officer)

75

EX-10

Exhibit 10

TENTH SUPPLEMENTAL INDENTURE

from

YANKEE GAS SERVICES COMPANY

to

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

TRUSTEE

_________________________________

Dated as of April 1, 2010

Supplemental to Indenture of Mortgage

and Deed of Trust from

Yankee Gas Services Company to

The Bank of New York Mellon Trust Company, N.A. (formerly known as

The Bank of New York Trust Company, N.A., successor to

The Bank of New York, successor to
Fleet National Bank, formerly known as

The Connecticut National Bank), Trustee,

dated as of July 1, 1989

TENTH SUPPLEMENTAL INDENTURE

TENTH SUPPLEMENTAL INDENTURE, dated as of April 1, 2010 between YANKEE GAS SERVICES COMPANY, a specially chartered Connecticut corporation (herein called the "Company”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking corporation, successor as trustee to The Bank of New York, as successor to Fleet National Bank (formerly known as The Connecticut National Bank), as Trustee (the "Trustee”) under the Indenture of Mortgage and Deed of Trust, dated as of July 1, 1989, executed and delivered by the Company (herein called the "Original Indenture”; the Original Indenture and any and all indentures and instruments supplemental thereto, including, without limitation, this Tenth Supplemental Indenture, being herein called the "Indenture”);

WHEREAS, pursuant to Sections 13.01(C), 13.01(G), 3.03 and Article Five of the Original Indenture, the Company desires to provide for the issuance under the Indenture of a new series of Bonds, which Bonds will be secured by and entitled to the benefits of the Indenture, and to add to its covenants and agreements contained in the Original Indenture certain other covenants and agreements; and

WHEREAS, the Company proposes to effect the amendments to the Indenture hereinafter specified;

WHEREAS, all acts and things necessary to make this Tenth Supplemental Indenture a valid, binding and legal instrument have been performed, and the issuance of the new series of Bonds, subject to the terms of the Original Indenture, has been duly authorized by the Board of Directors of the Company and approved by the Connecticut Department of Public Utility Control, and the Company has requested and hereby requests the Trustee to enter into and join the Company in the execution and delivery of this Tenth Supplemental Indenture;

NOW, THEREFORE, THIS TENTH SUPPLEMENTAL INDENTURE WITNESSETH, that, to secure the payment of the principal of (and premium, if any) and interest on the Outstanding Secured Bonds, including the new series of Bonds hereunder issued, and the performance of the covenants therein and herein contained and to declare the terms and conditions on which all such Outstanding Secured Bonds are secured, and in consideration of the premises and of the purchase of the Bonds by the Holders thereof, the Company by these presents does grant, bargain, sell, alien, remise, release, convey, assign, transfer, mortgage, hypothecate, pledge, set over and confirm to the Trustee, all property, rights, privileges and franchises of the Company of every kind and description, real, personal or mixed, tangible and intangible, whether now owned or hereafter acquired by the Company, wherever located, and grants a security interest therein for the pur poses herein expressed, except any Excepted Property which is expressly excepted from the lien hereof in the Original Indenture, and including, without limitation, all and singular the following:

All property, rights, privileges and franchises particularly described in the Original Indenture, and any and all indentures and instruments supplemental thereto, including, without limitation, the First Supplemental Indenture dated as of April 1, 1992, the Second Supplemental Indenture dated as of December 1, 1992, the Third Supplemental Indenture dated as of June 1, 1995, the Fourth Supplemental Indenture dated as of April 1, 1997, the Fifth Supplemental Indenture dated as of January 1, 1999, the Sixth Supplemental Indenture dated as of January 1, 2004, the Seventh Supplemental Indenture dated as of November 1, 2004, the Eighth Supplemental Indenture dated as of July 1, 2005, and the Ninth Supplemental Indenture dated as of October 1, 2008, in addition, all the property, rights, privileges and franchises particularly described in Schedule A annexed to this Tenth Supplemental Indenture, which are hereby made a part of, and deemed to be described herein, as fully as if set forth herein at length.

TO HAVE AND TO HOLD all said property, rights, privileges and franchises of every kind and description, real, personal or mixed, hereby and hereafter (by supplemental indenture or otherwise) granted, bargained, sold, aliened, remised, released, conveyed, assigned, transferred, mortgaged, hypothecated, pledged, set over or confirmed as aforesaid, or intended, agreed or covenanted so to be, together with all the appurtenances thereto appertaining (said properties, rights, privileges and franchises, including any cash and securities hereafter deposited or required to be deposited with the Trustee (other than any such cash which is specifically stated herein not to be deemed part of the Trust Estate), being herein collectively called "Trust Estate") unto the Trustee and its successors and assigns forever.

SUBJECT, HOWEVER, to Permitted Encumbrances (as defined in Section 1.01 of the Original Indenture).

BUT IN TRUST, NEVERTHELESS, for the proportionate and equal benefit and security of the Holders from time to time of all the Outstanding Secured Bonds without any preference or priority of any such Bond over any other such Bond.

UPON CONDITION that, until the happening of an Event of Default (as defined in Section 1.01 of the Original Indenture) and subject to the provisions of Article Six of the Original Indenture, the Company shall be permitted to possess and use the Trust Estate, except cash, securities and other personal property deposited and pledged, or required to be deposited and pledged, with the Trustee, and to receive and use the rents, issues, profits, revenues and other income of the Trust Estate.

AND IT IS HEREBY DECLARED that in order to set forth the terms and provisions of the new series of Bonds and in consideration of the premises and of the purchase and acceptance of such Bonds by the holders thereof, and in consideration of the sum of One Dollar ($1.00) to it duly paid by the Trustee, and of other good and valuable consideration, the receipt whereof is hereby acknowledged, and for the purpose of securing the faithful performance and observance of all the covenants and conditions of the

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Indenture, the Company hereby covenants and agrees with the Trustee and provides as follows:

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

Section 1.01.

Terms from the Original Indenture.  All defined terms used in this Tenth Supplemental Indenture and not otherwise defined herein shall have the respective meanings ascribed to them in the Original Indenture.

Section 1.02.

References are to Tenth Supplemental Indenture.  Unless the context otherwise requires, all references herein to "Articles," "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Tenth Supplemental Indenture, and the words "herein," "hereof," "hereby," "hereunder" and words of similar import refer to this Tenth Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision hereof or to the Original Indenture.

ARTICLE II

SERIES K BONDS

Section 2.01

Specific Title, Terms and Forms.  There is hereby created and shall be outstanding under and secured by the Indenture a series of Bonds entitled "First Mortgage Bonds, 4.87% Series K, Due 2020" (herein called the "Series K Bonds"), limited in aggregate principal amount at any one time outstanding to Fifty Million Dollars ($50,000,000).  The form of the Series K Bonds shall be substantially as set forth in Exhibit A hereto with such insertions, omissions, substitutions and variations as may be determined by the officers executing the same as evidenced by their execution thereof.

The Series K Bonds shall be issued as fully registered Bonds in denominations of $500,000 or any amount in excess thereof which is an integral multiple of $250,000 (except as may be necessary to reflect any principal amount not evenly divisible by $250,000 remaining after any partial redemption), or in such other denominations as the Trustee may approve.  The Series K Bonds shall be numbered K-1 and consecutively upwards, or in any other manner deemed appropriate by the Trustee.  The Series K Bonds shall mature on April 1, 2020 and shall bear interest from the date of issuance thereof (or from the most recent Interest Payment Date to which interest has been paid or duly provided for) at the rate of 4.87% per annum (computed on the basis of a 360-day year of twelve 30-day months).  Interest Payment Dates for the Series K Bonds shall be (i) April 1

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and October 1 of each year, commencing October 1, 2010, and (ii) at the Stated Maturity of the principal.

Notwithstanding the otherwise applicable provisions of the Indenture, the principal and the Redemption Price of, and interest on, the Series K Bonds shall be payable by Federal funds bank wire transfer of immediately available funds so long as required by Section 5.1 of the Bond Purchase Agreements, each dated April 22, 2010, between the Company and the initial purchasers of the Series K Bonds (the "Bond Purchase Agreements") or, in the event such section shall no longer be applicable, at the office or agency of the Company in New York, New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public or private debts.

The Regular Record Date referred to in Section 3.09 of the Original Indenture for the payment of the interest on the Series K Bonds payable, and punctually paid or duly provided for, on any Interest Payment Date shall be the 1st day (whether or not a business day) of the calendar month next preceding such Interest Payment Date.

Section 2.02

No Sinking Fund; No Mandatory Scheduled Redemptions Prior to Final Maturity.  The Series K Bonds shall not be subject to any sinking fund or mandatory scheduled redemption prior to final maturity.

Section 2.03

Optional Redemption.  The Series K Bonds shall be redeemable at the option of the Company in whole at any time or in part from time to time prior to their Stated Maturity, at a redemption price equal to the principal amount of the Series K Bonds being prepaid plus accrued interest thereon to the date of such redemption together with a premium equal to the then applicable Make-Whole Amount.

The Company will give notice of any optional redemption of the Series K Bonds pursuant to this Section 2.03 to each Holder thereof not less than 30 days nor more than 60 days before the date fixed for such optional redemption, specifying (a) such date, (b) the principal amount of the Holder's Bond to be redeemed on such date, (c) that a premium may be payable, (d) the estimated premium, calculated as of the day such notice is given, and (e) the accrued interest applicable to the redemption.  Such notice of redemption shall also certify all facts, if any, which are conditions precedent to any such redemption.  Notice of redemption having been so given, the aggregate principal amount of the Series K Bonds specified in such notice, together with accrued interest thereon, and the premium, if any, payable with respect thereto shall become due and payable on the redemption date specified in such notice.  Two business days prior to the redemption date specified in such notice of optional redemption, the Company shall provide the Trustee and each Holder of a Bond written notice of whether or not any premium is payable in connection with such redemption, the premium, if any, calculated as of the second business day prior to the redemption date, and a reasonably detailed computation of the Make-Whole Amount.  The Trustee shall be under no duty to inquire into, may conclusively presume the correctness of, and shall be fully protected in acting upon the Company’s calculation of any Make-Whole Amount.

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For purposes of this Section 2.03, the term "Make-Whole Amount," as calculated by the Company, shall mean in connection with any optional redemption of the Series K Bonds the excess, if any, of (a) the aggregate present value as of the date of such redemption of each dollar of principal amount of Series K Bonds being redeemed and the amount of interest (exclusive of interest accrued to the date of redemption) that would have been payable in respect of such dollar if such redemption had not been made, determined by discounting such amounts at the Reinvestment Rate from the respective dates on which they would have been payable, over (b) 100% of the principal amount of the outstanding Series K Bonds being redeemed.

The "Reinvestment Rate" means (1) the sum of 0.50% plus the yield reported on page "USD" of the Bloomberg Treasury/Money Market Monitor Screen (or, if not available, any other nationally recognized trading screen reporting on-line intraday trading in United States government securities) at 12:00 noon (New York time) on such date for United States government securities having a maturity rounded to the nearest month corresponding to the remaining Weighted Average Life to Maturity of the principal being redeemed, prepaid or paid or (2) in the event that no such nationally recognized trading screen reporting on-line intraday trading in United States government Securities is available, Reinvestment Rate means 0.50% plus the arithmetic mean of the yields under the respective headings "This Week" and "Last Week" published in the Statistical Release under the caption "Treasury Constant Maturities" for the maturity (rounded to the nearest month) corresponding to the Weighted Average Life to Maturity of the principal being redeemed.  If no maturity exactly corresponds to such Weighted Average Life to Maturity, yields for the two published maturities most closely corresponding to such Weighted Average Life to Maturity shall be calculated pursuant to the immediately preceding sentence, and the Reinvestment Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding in each of such relevant periods to the nearest month.  For purposes of calculating the Reinvestment Rate, the most recent Statistical Release published prior to the date of determination of the Make-Whole Amount shall be used.

For purposes of this Section 2.03, "Weighted Average Life to Maturity" of the principal amount of the Series K Bonds being redeemed shall mean, as of the time of any determination thereof, the number of years obtained by dividing the then Remaining Dollar-Years of such principal by the aggregate amount of such principal.  The term "Remaining Dollar-Years" of such principal shall mean the amount obtained by multiplying the amount of principal that would have become due at the Stated Maturity of the Series K Bonds if such redemption had not been made by the number of years (calculated to the nearest one-twelfth) which will elapse between the date of determination and the Stated Maturity of the Series K Bonds.

As used in this Section 2.03, "Statistical Release" shall mean the then most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively traded United States government securities adjusted to constant maturities or, if such

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statistical release is not published at the time of any determination hereunder, then such other reasonably comparable index which shall be designated by the Holders of 66-2/3% in aggregate principal amount of the outstanding Series K Bonds.

The principal amount, if any, of the Series K Bonds to be redeemed pursuant to this Section 2.03 shall be selected on a pro rata basis from all Series K Bonds Outstanding on the Redemption Date.

The Series K Bonds shall not be redeemable at the option of the Company prior to their Stated Maturity other than as provided in this Section 2.03.

Section 2.04.

Place of Payment.  The principal and the redemption price of, and the premium, if any, and the interest on, the Series K Bonds shall be payable at the principal corporate trust office of The Bank of New York Mellon Trust Company, N.A., in New York, New York.

Section 2.05.

Exchangeability.  Subject to Section 3.07 of the Original Indenture, all Series K Bonds shall be fully interchangeable, and, upon surrender at the office or agency of the Company in a Place of Payment therefor, shall be exchangeable for other Series K Bonds of a different authorized denomination or denominations, as requested by the Holder surrendering the same.  The Company will execute, and the Trustee shall authenticate and deliver, Series K Bonds whenever the same are required for any such exchange.

Section 2.06.

Bond Purchase Agreements.  Reference is made to Sections 5 and 7 of the Bond Purchase Agreements for certain provisions governing the rights and obligations of the Company, the Trustee and the Holders of the Series K Bonds.  Such provisions are deemed to be incorporated in this Article II by reference as if set forth herein at length.

Section 2.07.

Restrictions on Transfer.  All Series K Bonds originally issued hereunder shall bear the following legend:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").  THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF YANKEE GAS SERVICES COMPANY (THE "COMPANY") AND PRIOR HOLDERS THAT THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE COMPANY (UPON REDEMPTION THEREOF OR OTHERWISE), (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A UNDER THE 1933 ACT, IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) IN

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AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE 1933 ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULE 144 (IF AVAILABLE) UNDER THE 1933 ACT, (5) IN RELIANCE ON ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, SUBJECT TO THE RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, SUBJECT (IN THE CASE OF CLAUSES (2), (3), (4) AND (5)) TO THE RECEIPT BY THE COMPANY OF A CERTIFICATION OF THE TRANSFEROR TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE 1933 ACT, AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY JURISDICTION OF THE UNITED STATES.  THE HOLDER OF THIS SECURITY WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOT IFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO HEREIN.

All Series K Bonds issued upon transfer or exchange thereof shall bear such legend unless the Company shall have delivered to the Trustee an Opinion of Counsel which states that the Series K Bonds may be issued without such legend.  All Series K Bonds issued upon transfer or exchange of a Series K Bond or Bonds which do not bear such legend shall be issued without such legend.  The Company may from time to time modify the foregoing restrictions on resale and other transfers, without the consent of but upon notice to the Holders, in order to reflect any amendment to Rule 144A under the Securities Act of 1933 or change in the interpretation thereof or practices thereunder.

Section 2.08.

Authentication and Delivery.  Upon the execution of this Tenth Supplemental Indenture, the Series K Bonds shall be executed by the Company and delivered to the Trustee for authentication, and thereupon the same shall be authenticated and delivered by the Trustee pursuant to and upon Company Request.

Section 2.09.

Default.  Pursuant to the Original Indenture (and notwithstanding any provision of Section 9.22 thereof to the contrary), for purposes of determining whether an Event of Default exists with respect to the Series K Bonds, any default in payment (whether due as a scheduled installment of principal or interest, or at original maturity or earlier redemption or acceleration, or otherwise) with respect to Bonds of any other series which constitutes an Event of Default with respect to the Bonds of such series shall also constitute an Event of Default with respect to the Series K Bonds.

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Section 2.10.  Consent to and Amendment of Available Income Certificate Requirement.

(a)  Each Holder of a Series K Bond (including any successors and assigns and any owner of a book-entry interest therein), solely by virtue of its acquisition thereof, shall have and be deemed to have irrevocably consented, without the need for any further action or consent by such Holder, to any and all amendments to the Indenture which are intended to eliminate or modify in any manner the requirement for an Available Income Certificate in connection with the issuance of additional bonds upon the basis of retirement of bonds, as provided for in Section 5.03(C)(2) thereof.

(b) Effective with the issuance of the Series K Bonds, as a result of having obtained the consent of not less than a majority in principal amount of all Bonds outstanding under the Indenture, Section 5.03 of the Original Indenture is hereby amended to eliminate the requirement for an Available Income Certificate in connection with the issuance of additional bonds upon the basis of retirement of bonds, as follows:   

(1)

Subsection 5.03(C)(2) shall be deleted in its entirety and the following shall be substituted:  “[RESERVED]”

(2)

Subsection 5.03(E) shall be deleted in its entirety and the following shall be substituted:     “[RESERVED]”   

Section 2.11.

Consent to Amendment and Restatement of Mortgage Indenture; Future Changes.  Each Holder of a Series K Bond (including any successors and assigns and any owner of a book-entry interest therein), solely by virtue of its acquisition thereof, shall have and be deemed to have consented, without the need for any further action or consent by such Holder, to: (1) the amendment and restatement of the Indenture in substantially the form set forth in Exhibit B to this Tenth Supplemental Indenture (the “Amended and Restated Indenture”); (2) such additions, deletions, and other changes made to such form prior to the time of the effectiveness of the Amended and Restated Indenture (“Future Changes”) (a) that add to the covenants of the Company in the Amended and Restated Indenture, or surrender rights or powers of the Company therein, for the benefit of the Holders of the Outstan ding Bonds, (b) as shall be requested by the Trustee and its counsel, (c) as may be requested by the Department of Public Utility Control of the State of Connecticut or other regulatory authority having jurisdiction over the Company, or (d) otherwise, as shall be proposed by the Company after the date of the execution and delivery of this Tenth Supplemental Indenture, provided that (i) in the case of any Future Change described in clause (2)(d) such Future Change is not, in the reasonable judgment of the Company, inconsistent with the fundamental structure and terms of the Amended and Restated Indenture, and (ii) in the case of any Future Change described in clause (2)(c) or (d), such Future Change does not, in the reasonable judgment of the Company, adversely affect in any material respect the interests of the Holders of the Bonds; and (3) the following changes to such form:

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(A)

The deletion of subsection (vi) of clause (A) of the definition of “Permitted Liens” in Section 101, and the substitution of the following language therefor:  "(vi) easements and rights of way granted by the Company that, in the opinion of the Board of Directors, will not impair the usefulness of such property in the conduct of the Company's business and will not be prejudicial to the interests of the Holders, provided that, if the Company shall be entitled to receive any money or property as consideration or compensation for such grant, forthwith upon its receipt by the Company, such money to the extent it exceeds $100,000 shall be deposited with the Trustee (unless otherwise required by a Lien prior to or on a parity with the lien of this Mortgage) and any such property shall otherwise be subjected to the lien of this Mortgage, and similar rights granted by any predecessor in title of the Company ;"

(B)

In Section 101, the addition of the following new subsection (xxiv) to clause (B) of the definition of “Permitted Liens”: “(xxiv) Liens encumbering gas distribution easements, provided that such Liens do not in the aggregate materially impair the use of the Mortgaged Property taken as a whole for the purposes for which it is held by the Company.”

(C)

The deletion of Section 1603(e), and the substitution of the following language therefor: “(e)    An Opinion of Counsel to the effect that the certificates and other instruments and cash, if any, which have been or are therewith delivered to or deposited and pledged with the Trustee conform to the requirements of this Mortgage, and that, upon the basis of the Company Order, the property to be released may be lawfully released from the lien of this Mortgage and that all conditions precedent herein provided for relating to such release have been complied with.”

(D)

The deletion of Section 1606(a)(iv), and the substitution of the following language therefor: "(iv)  an Opinion of Counsel to the effect that the certificates and other instruments which have been or are therewith delivered to the Trustee conform to the requirements of this Mortgage, and that all conditions precedent herein provided for relating to such withdrawal have been complied with.”

ARTICLE III

MISCELLANEOUS PROVISIONS

Section 3.01.

Effectiveness and Ratification of Indenture.  The provisions of this Tenth Supplemental Indenture shall be effective from and after the execution hereof; and the Indenture, as hereby supplemented, shall remain in full force and effect.

Section 3.02.

Titles.  The titles of the several Articles and Sections of this Tenth Supplemental Indenture shall not be deemed to be any part thereof, are inserted for convenience only and shall not affect any interpretation hereof.

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Section 3.03.

Acceptance of Trust; Not Responsible for Recitals; Etc.  The Trustee hereby accepts the trusts herein declared, provided, created or supplemented and agrees to perform the same upon the terms and conditions herein and in the Original Indenture, as heretofore supplemented, set forth and upon the following terms and conditions:

The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Tenth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely.  In general, each and every term and condition contained in Article Ten of the Original Indenture shall apply to and form part of this Tenth Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Tenth Supplemental Indenture.

Section 3.04.

Successors and Assigns.  All covenants, provisions, stipulations and agreements in this Tenth Supplemental Indenture contained are and shall be for the sole and exclusive benefit of the parties hereto, their successors and assigns, and (subject to the provisions of the Bond Purchase Agreements) of the Holders and registered owners from time to time of the Bonds issued and outstanding under and secured by the Indenture (except that the provisions of Article II hereof are and shall be for the sole and exclusive benefit of the Holders of the Series K Bonds).

Section 3.05.

Counterparts.  This Tenth Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

Section 3.06.

Governing Law.  The laws of the State of Connecticut shall govern this Tenth Supplemental Indenture and the Series K Bonds, except to the extent that the validity or perfection of the lien of the Indenture, or remedies thereunder, are governed by the laws of a jurisdiction other than the State of Connecticut.

[THIS SPACE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Tenth Supplemental Indenture to be duly executed, sealed and attested as of the day and year first above written.

YANKEE GAS SERVICES COMPANY

By

/s/ Susan B. Weber

Name: Susan B. Weber

Title: Assistant Treasurer - Finance

Attest:

  /s/ O. Kay Comendul

Name: O. Kay Comendul

Title:    Assistant Secretary

Executed, sealed and delivered by

YANKEE GAS SERVICES COMPANY

in the presence of:

  /s/ Leonard Rodriguez

  /s/ Katrina M. Manley

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee

By  /s/ Raymond K. O’Neil

Name: Raymond K. O’Neil

Title: Senior Associate

Attest:

 /s/ Leslie Lockhart

Executed, sealed and delivered by

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Trustee, in the presence of:

/s/ [illegible]

/s/ [illegible]

STATE OF CONNECTICUT

)

)  ss.:  Hartford

COUNTY OF HARTFORD

)

On this 19th day of April, 2010, before me, Katrina M. Manley, the undersigned officer, personally appeared Susan B. Weber and O. Kay Comendul, who acknowledged themselves to be the Assistant Treasurer – Finance and Assistant Secretary, respectively, of Yankee Gas Services Company, a Connecticut corporation, and that they, as such officers, being authorized so to do, executed the foregoing instrument for the purpose therein contained, by signing the name of the corporation by themselves as such officers, and as their free act and deed.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

 /s/ Katrina M. Manley

 Katrina M. Manley

Notary Public

My commission expires: August 31, 2014

(SEAL)

STATE OF PENNSYLVANIA

)

)  ss.:  Pittsburgh

COUNTY OF ALLEGHENY

)

On this 19th day of April, 2010, before me, Jeremy Sopko, the undersigned officer, personally appeared Raymond K. O’Neil and Leslie Lockhart who acknowledged themselves to be a  Senior Associate and Senior Associate, respectively of The Bank of New York Mellon Trust Company, N.A., a national banking association, and that they, as such officers, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the association by themselves as such officers, and as their free act and deed.

IN WITNESS WHEREOF, I hereunto set my hand.

 /s/ Jeremy Sopko

 Jeremy Sopko

Notary Public

My commission expires: September 1, 2013

SCHEDULE A

ALL THE PROPERTY, RIGHT, PRIVILEGES AND FRANCHISES AS SET FORTH IN THE FOLLOWING DESCRIPTIONS.

EXHIBIT A

[FORM OF FIRST MORTGAGE BOND, 4.87% SERIES K, DUE 2020]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").  THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF YANKEE GAS SERVICES COMPANY (THE "COMPANY") AND PRIOR HOLDERS THAT THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE COMPANY (UPON REDEMPTION THEREOF OR OTHERWISE), (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A UNDER THE 1933 ACT, IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE 1933 ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULE 144 (IF AVAILABLE) UNDER THE 1933 ACT, (5) IN RELIANCE ON ANOTHER EXEMPTION FROM THE RE GISTRATION REQUIREMENTS OF THE 1933 ACT, SUBJECT TO THE RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE 1933 ACT OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, SUBJECT (IN THE CASE OF CLAUSES (2), (3), (4) AND (5)) TO THE RECEIPT BY THE COMPANY OF A CERTIFICATION OF THE TRANSFEROR TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY JURISDICTION OF THE UNITED STATES.  THE HOLDER OF THIS SECURITY WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO HEREIN.

Yankee Gas Services Company

First Mortgage Bonds,

4.87% Series K, Due 2020

CUSIP Number: 98478* AQ0

No. K - [      ]

Principal Amount:  [$           ]

Stated Maturity of Principal:  April 1, 2020

Applicable Rate:   4.87%

Interest Payment Dates:

April 1 and October 1, commencing October 1, 2010 and at the Stated Maturity of the principal

Yankee Gas Services Company, a specially chartered Connecticut corporation (hereinafter called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to [___________], or registered assigns, at the Stated Maturity set forth above, the Principal Amount set forth above (or so much thereof as shall not have been paid upon prior redemption) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) thereon from the date of issuance hereof or from the most recent Interest Payment Date to which interest has been paid or duly provided for, on each Interest Payment Date set forth above in each year at the Applicable Rate set forth above.  The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in said Indenture, be paid to the Person in whose name this Bond (or one or more Predecessor Bonds, as defined in said Indenture) is registered at the close of business on the Regular Record Date for such interest, which shall be the 1st day (whether or not a business day) of the calendar month next preceding such Interest Payment Date.  Any such interest not so punctually paid or duly provided for shall be paid to the Person in whose name this Bond is registered on the business day immediately preceding the date of such payment.  If all or any portion of the principal of, or the premium (if any) or interest on, this Bond shall not be paid when due, the amount not so paid shall bear interest at the lesser of (x) the highest rate allowed by applicable law or (y) the greater of (i) the Prime Rate (as defined in the Bond Purchase Agreements) or (ii) 5.87% (the Applicable Rate plus 1% per annum).

The principal and the Redemption Price of, and the interest on, this Bond shall be payable at the principal corporate trust office of The Bank of New York Mellon Trust Company, N.A., in New York, New York.  All such payments shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

This Series K Bond is one of a duly authorized issue of Bonds of the Company designated as its "First Mortgage Bonds" (herein called the "Bonds"), issued and to be issued in one or more series under, and all equally and ratably secured by, an Indenture of Mortgage and Deed of Trust,

dated as of July 1, 1989 (herein, together with any indenture or instruments supplemental thereto, including the First Supplemental Indenture dated as of April 1, 1992, the Second Supplemental Indenture dated as of December 1, 1992, the Third Supplemental Indenture dated as of June 1, 1995, the Fourth Supplemental Indenture dated as of April 1, 1997, the Fifth Supplemental Indenture dated as of January 1, 1999, the Sixth Supplemental Indenture dated as of January 1, 2004, the Seventh Supplemental Indenture dated as of November 1, 2004, the Eighth Supplemental Indenture dated as of July 1, 2005, the Ninth Supplemental Indenture dated as of October 1, 2008, and the Tenth Supplemental Indenture dated as of April 1, 2010 (the “Tenth Supplemental Indenture”), called the "Indenture"), between the Company and The Bank of New York Mellon Trust Company, N.A., (formerly known as The Bank of New York Tru st Company, N.A.), successor as trustee to The Bank of New York, successor to Fleet National Bank (formerly known as The Connecticut National Bank), as Trustee (herein called the "Trustee," which term includes any successor Trustee under the Indenture).  Reference is hereby made to the Indenture for a description of the properties thereby mortgaged, pledged and assigned, the nature and extent of the security, the respective rights thereunder of the Holders of the Bonds, the Trustee and the Company, and the terms upon which the Bonds are, and are to be, authenticated and delivered.  All capitalized terms used in this Bond which are not defined herein shall have the respective meanings ascribed thereto in the Indenture.  Reference is also made to the Bond Purchase Agreements, as defined in the Tenth Supplemental Indenture, for a further description of the respective rights of the Holders of the Series K Bonds, the Company and the Trustee, and the terms applicable to the Series K Bonds.

As provided in the Indenture, the Bonds are issuable in series which may vary as in the Indenture provided or permitted.  This Series K Bond is one of the series specified in its title.

The Series K Bonds are not subject to any sinking fund or mandatory scheduled redemption prior to final maturity.

As provided in the Indenture, at the option of the Company, the Series K Bonds shall be redeemable in whole at any time or in part from time to time, prior to their Stated Maturity, at a redemption price equal to the principal amount of the Series K Bonds being prepaid plus accrued interest thereon to the date of such redemption together with a premium equal to the then applicable Make-Whole Amount.

The Company will give notice of any optional redemption of the Series K Bonds pursuant to Section 2.03 of the Tenth Supplemental Indenture to each Holder thereof not less than 30 days nor more than 60 days before the date fixed for such optional redemption, specifying (a) such date, (b) the principal amount of the Holder's Bond to be redeemed on such date, (c) that a premium may be payable, (d) the estimated premium, calculated as of the day such notice is given and (e) the accrued interest applicable to the redemption.  Such notice of redemption shall also certify all facts, if any, which are conditions precedent to any such redemption.  Notice of redemption having been so given, the aggregate principal amount of the Series K Bonds specified in such notice, together with accrued interest thereon, and the premium, if any, payable with respect thereto shall beco me due and payable on the redemption date specified in such notice.  Two business days prior to the redemption date specified in such notice of optional redemption, the Company shall provide the Trustee and each Holder of a

-4-

Bond written notice of whether or not any premium is payable in connection with such redemption, the premium, if any, calculated as of the second business day prior to the redemption date, and a reasonably detailed computation of the Make-Whole Amount.

Bonds (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall thereupon cease to be entitled to the lien of the Indenture and shall cease to bear interest from and after the date fixed for redemption (in each event, so long as the payment due on any such date shall be made).  The principal amount of the Series K Bonds to be redeemed upon any optional redemption thereof shall be applied pro rata to all such Series K Bonds Outstanding on the Redemption Date.

If an Event of Default, as defined in the Indenture, shall occur, the principal of the Series K Bonds may become or be declared due and payable in the manner and with the effect provided in the Indenture and the Bond Purchase Agreements.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Bonds under the Indenture at any time by the Company with the consent of the Holders of a majority in aggregate principal amount of the Bonds of all series at the time Outstanding affected by such modification.  The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of Bonds at the time Outstanding on behalf of the Holders of all the Bonds, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences.  Any such consent or waiver agreed to as set forth above by the Holder of this Bond shall be conclusive and binding upon such Holder and upon all future Holders of this Bond and of any Bond issued upon the transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Bond.

As set forth in the Tenth Supplemental Indenture, each Holder of a Series K Bond (including any successors and assigns and any owner of a book-entry interest therein), solely by virtue of its acquisition thereof, shall have and be deemed to have irrevocably consented, without the need for any further action or consent by such Holder, to any and all amendments to the Indenture which are intended to eliminate or modify in any manner the requirement for an Available Income Certificate in connection with the issuance of additional bonds upon the basis of retirement of bonds, as provided for in Section 5.03(C)(2) thereof. Effective with the issuance of the Series K Bonds, as a result of having obtained the consent of not less than a majority in principal amount of all Bonds outstanding under the Indenture, the Original Indenture has been so amended to eliminate the requirement for an Available Income Certificate in connect ion with the issuance of additional bonds upon the basis of retirement of bonds.

As set forth in the Tenth Supplemental Indenture, each Holder of a Series K Bond, (including any successors and assigns and any owner of a book-entry interest therein), solely by virtue of its acquisition thereof, has and has been deemed to have consented, without the need for any further action or consent by such Holder, to the amendment and restatement of the Indenture in substantially the form set forth in Exhibit B appended to the Tenth Supplemental Indenture,

-5-

with such additions, deletions, and other changes made to such form prior to the time of such amendment and restatement as are more fully described in the Tenth Supplemental Indenture.  

No reference herein to the Indenture and no provision of this Bond or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Bond at the times, places and rates, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, this Bond is transferable on the Bond Register of the Company, upon surrender of this Bond for transfer at the office or agency of the Company in New York, New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Bond Registrar, duly executed by the Registered Holder hereof or by his attorney duly authorized in writing, and thereupon one or more new Bonds of the same series, or authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

All Bonds of this series shall be fully interchangeable, and, upon surrender at the office or agency of the Company in a Place of Payment therefor, shall be exchangeable for other Bonds of this series of a different authorized denomination or denominations, as requested by the Holder surrendering the same.

No service charge shall be made for any transfer or exchange hereinbefore referred to, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Bond is overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

Unless the certificate of authentication hereon has been executed by the Trustee or Authenticating Agent by manual signature, this Bond shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

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[Signature page for Yankee Gas Services Company, First Mortgage Bond, 4.87% Series K, Due 2020]

IN WITNESS WHEREOF, the Company has caused this Bond to be duly executed under its corporate seal.

Dated: __________________

YANKEE GAS SERVICES COMPANY

By

Name:

Title:  

Attest:

This is one of the Bonds of the series designated therein referred to in the within-mentioned Indenture.

THE BANK OF NEW YORK MELLON

TRUST COMPANY, N.A., as Trustee

By

Authorized Officer

-7-

EXHIBIT B

FORM OF AMENDED AND RESTATED MORTGAGE INDENTURE

COMPOSITE (Including All Amendments to ______________________)

___________________________

INDENTURE OF MORTGAGE AND DEED OF TRUST

Dated as of July 1, 1989

___________________________

YANKEE GAS SERVICES COMPANY

TO

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

(Formerly known as

The Bank of New York Trust Company, N.A.,

successor to The Bank of New York, successor to
Fleet National Bank, formerly known as

The Connecticut National Bank),

   Trustee

___________________________

As Amended by ____________ Supplemental Indentures

(to and including the ___ Supplemental Indenture dated as of ____________________.)

___________________________

-8-

TABLE OF CONTENTS

Yankee Gas Services Company
Indenture of Mortgage and Deed of Trust
Dated as of July 1, 1989
(as amended and restated as of ______________)

PARTIES

1

GRANTING CLAUSES

1

HABENDUM

3

ARTICLE One

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION  1

SECTION 101.

DEFINITIONS

1

SECTION 102.

PROPERTY ADDITIONS; COST

1

SECTION 103.

COMPLIANCE CERTIFICATES AND OPINIONS

1

SECTION 104.

FORM OF DOCUMENTS DELIVERED TO TRUSTEE

1

SECTION 105.

ACTS OF HOLDERS

1

SECTION 106.

NOTICES, ETC. TO TRUSTEE OR COMPANY

1

SECTION 107.

NOTICE TO HOLDERS OF SECURITIES; WAIVER

1

SECTION 108.

CONFLICT WITH TRUST INDENTURE ACT

1

SECTION 109.

EFFECT OF HEADINGS AND TABLE OF CONTENTS

1

SECTION 110.

SUCCESSORS AND ASSIGNS

1

SECTION 111.

SEPARABILITY CLAUSE

1

SECTION 112.

BENEFITS OF MORTGAGE

1

SECTION 113.

GOVERNING LAW

1

SECTION 114.

LEGAL HOLIDAYS

1

SECTION 115.

INVESTMENT OF CASH HELD BY TRUSTEE

1

SECTION 116.

DEFINITIONS AND REFERENCES IN SUPPLEMENTAL INDENTURES  1

ARTICLE Two

SECURITY FORMS

1

SECTION 201.

FORMS GENERALLY

1

SECTION 202.

FORM OF TRUSTEE’S CERTIFICATE OF

AUTHENTICATION

1

ARTICLE Three

THE SECURITIES

1

SECTION 301.

AMOUNT UNLIMITED; ISSUABLE IN SERIES

1

SECTION 302.

DENOMINATIONS

1

SECTION 303.

EXECUTION, AUTHENTICATION, DELIVERY AND

DATING

1

SECTION 304.

TEMPORARY SECURITIES

1

SECTION 305.

REGISTRATION, REGISTRATION OF TRANSFER AND

EXCHANGE

1

SECTION 306.

MUTILATED, DESTROYED, LOST AND STOLEN

\- i -

SECURITIES

1

SECTION 307.

PAYMENT OF INTEREST; INTEREST RIGHTS

PRESERVED

1

SECTION 308.

PERSONS DEEMED OWNERS

1

SECTION 309.

CANCELLATION

1

SECTION 310.

COMPUTATION OF INTEREST

1

SECTION 311.

PAYMENT TO BE IN PROPER CURRENCY

1

SECTION 312.

EXTENSION OF INTEREST PAYMENT

1

SECTION 313.

CUSIP NUMBERS

1

ARTICLE Four

ISSUANCE OF SECURITIES

1

SECTION 401.

ISSUANCE OF SECURITIES

1

ARTICLE Five

REDEMPTION OF SECURITIES

1

SECTION 501.

APPLICABILITY OF ARTICLE

1

SECTION 502.

ELECTION TO REDEEM; NOTICE TO TRUSTEE

1

SECTION 503.

SELECTION OF SECURITIES TO BE REDEEMED

1

SECTION 504.

NOTICE OF REDEMPTION

1

SECTION 505.

SECURITIES PAYABLE ON REDEMPTION DATE

1

SECTION 506.

SECURITIES REDEEMED IN PART

1

ARTICLE Six

SINKING FUNDS

1

SECTION 601.

APPLICABILITY OF ARTICLE

1

SECTION 602.

SATISFACTION OF SINKING FUND PAYMENTS WITH

SECURITIES

1

SECTION 603.

REDEMPTION OF SECURITIES FOR SINKING FUND

1

ARTICLE Seven

REPRESENTATIONS AND COVENANTS

1

SECTION 701.

PAYMENT OF SECURITIES; LAWFUL POSSESSION

1

SECTION 702.

MAINTENANCE OF OFFICE OR AGENCY

1

SECTION 703.

MONEY FOR SECURITIES PAYMENTS TO BE HELD IN

TRUST

1

SECTION 704.

CORPORATE EXISTENCE

1

SECTION 705.

ANNUAL OFFICERS’ CERTIFICATE AS TO COMPLIANCE  1

SECTION 706.

WAIVER OF CERTAIN COVENANTS

1

SECTION 707.

ISSUANCE OF SECURED DEBT

1

SECTION 708.

SALE AND LEASEBACK

1

ARTICLE Eight

SATISFACTION AND DISCHARGE

1

SECTION 801.

SATISFACTION AND DISCHARGE OF SECURITIES

1

SECTION 802.

EFFECTIVE TIME; SATISFACTION AND DISCHARGE OF

MORTGAGE

1

SECTION 803.

APPLICATION OF TRUST MONEY

1

ARTICLE Nine

EVENTS OF DEFAULT; REMEDIES

1

- ii -

SECTION 901.

EVENTS OF DEFAULT

1

SECTION 902.

ACCELERATION OF MATURITY; RESCISSION AND

ANNULMENT

1

SECTION 903.

COLLECTION OF INDEBTEDNESS AND SUITS FOR

ENFORCEMENT BY TRUSTEE

1

SECTION 904.

TRUSTEE MAY FILE PROOFS OF CLAIM

1

SECTION 905.

TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION

OF SECURITIES

1

SECTION 906.

APPLICATION OF MONEY COLLECTED

1

SECTION 907.

LIMITATION ON SUITS

1

SECTION 908.

UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE

PRINCIPAL, PREMIUM AND INTEREST

1

SECTION 909.

RESTORATION OF RIGHTS AND REMEDIES

1

SECTION 910.

RIGHTS AND REMEDIES CUMULATIVE

1

SECTION 911.

DELAY OR OMISSION NOT WAIVER

1

SECTION 912.

CONTROL BY HOLDERS OF SECURITIES

1

SECTION 913.

WAIVER OF PAST DEFAULTS

1

SECTION 914.

UNDERTAKING FOR COSTS

1

SECTION 915.

WAIVER OF USURY, STAY OR EXTENSION LAWS

1

SECTION 916.

DEFAULTS UNDER PRIOR LIENS

1

SECTION 917.

RECEIVER AND OTHER REMEDIES

1

ARTICLE Ten

THE TRUSTEE

1

SECTION 1001.

CERTAIN DUTIES AND RESPONSIBILITIES

1

SECTION 1002.

NOTICE OF DEFAULTS

1

SECTION 1003.

CERTAIN RIGHTS OF TRUSTEE

1

SECTION 1004.

NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF

SECURITIES

1

SECTION 1005.

MAY HOLD SECURITIES

1

SECTION 1006.

MONEY HELD IN TRUST

1

SECTION 1007.

COMPENSATION AND REIMBURSEMENT

1

SECTION 1008.

DISQUALIFICATION; CONFLICTING INTERESTS

1

SECTION 1009.

CORPORATE TRUSTEE REQUIRED; ELIGIBILITY

1

SECTION 1010.

RESIGNATION AND REMOVAL; APPOINTMENT OF

 SUCCESSOR

1

SECTION 1011.

ACCEPTANCE OF APPOINTMENT BY SUCCESSOR

1

SECTION 1012.

MERGER, CONVERSION, CONSOLIDATION OR

SUCCESSION TO BUSINESS

1

SECTION 1013.

PREFERENTIAL COLLECTION OF CLAIMS AGAINST

COMPANY

1

SECTION 1014.

CO-TRUSTEE AND SEPARATE TRUSTEES

1

SECTION 1015.

APPOINTMENT OF AUTHENTICATING AGENT

1

ARTICLE Eleven

HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY

1

SECTION 1101.

LISTS OF HOLDERS

1

SECTION 1102.

REPORTS BY TRUSTEE AND COMPANY

1

- iii -

ARTICLE Twelve

CONSOLIDATION, MERGER, CONVEYANCE, OR OTHER TRANSFER

1

SECTION 1201.

COMPANY MAY CONSOLIDATE, ETC., ONLY ON

CERTAIN TERMS

1

SECTION 1202.

SUCCESSOR COMPANY SUBSTITUTED

1

SECTION 1203.

EXTENT OF LIEN HEREOF ON PROPERTY OF

SUCCESSOR COMPANY

1

SECTION 1204.

RELEASE OF COMPANY UPON CONVEYANCE OR

OTHER TRANSFER

1

SECTION 1205.

MERGER INTO COMPANY; EXTENT OF LIEN HEREOF

1

SECTION 1206.

TRANSFER OF LESS THAN SUBSTANTIALLY ALL

1

ARTICLE Thirteen

SUPPLEMENTAL MORTGAGES

1

SECTION 1301.

SUPPLEMENTAL MORTGAGES WITHOUT

CONSENT OF HOLDERS

1

SECTION 1302.

SUPPLEMENTAL MORTGAGES WITH CONSENT

OF HOLDERS

1

SECTION 1303.

EXECUTION OF SUPPLEMENTAL MORTGAGES

1

SECTION 1304.

EFFECT OF SUPPLEMENTAL MORTGAGES

1

SECTION 1305.

CONFORMITY WITH TRUST INDENTURE ACT

1

SECTION 1306.

REFERENCE IN SECURITIES TO SUPPLEMENTAL

MORTGAGES

1

SECTION 1307.

MODIFICATION WITHOUT SUPPLEMENTAL

MORTGAGE

1

ARTICLE Fourteen

MEETINGS OF HOLDERS; ACTION WITHOUT MEETING

1

SECTION 1401.

PURPOSES FOR WHICH MEETINGS MAY BE CALLED

1

SECTION 1402.

CALL, NOTICE AND PLACE OF MEETINGS

1

SECTION 1403.

PERSONS ENTITLED TO VOTE AT MEETINGS

1

SECTION 1404.

QUORUM; ACTION

1

SECTION 1405.

ATTENDANCE AT MEETINGS; DETERMINATION

OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT

OF MEETINGS

1

SECTION 1406.

COUNTING VOTES AND RECORDING ACTION OF

MEETINGS

1

SECTION 1407.

ACTION WITHOUT MEETING

1

ARTICLE Fifteen

IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND

DIRECTORS

1

SECTION 1501.

LIABILITY SOLELY CORPORATE

1

ARTICLE Sixteen

POSSESSION, USE AND RELEASE OF MORTGAGED

PROPERTY

1

SECTION 1601.

QUIET ENJOYMENT; EXCEPTED PROPERTY AFTER

SECOND EFFECTIVE DATE

1

SECTION 1602.

DISPOSITIONS WITHOUT RELEASE

1

SECTION 1603.

RELEASE OF MORTGAGED PROPERTY

1

- iv -

SECTION 1604.

PRESERVATION OF LIEN

1

SECTION 1605.

RELEASE OF MINOR PROPERTIES; EFFECTIVE TIME

1

SECTION 1606.

WITHDRAWAL OR OTHER APPLICATION OF CASH

1

SECTION 1607.

RELEASE OF PROPERTY TAKEN BY EMINENT

 DOMAIN, ETC

1

SECTION 1608.

SECURED DEBT

1

SECTION 1609.

DISCLAIMER OR QUITCLAIM

1

SECTION 1610.

MISCELLANEOUS

1

SECTION 1611.

MAINTENANCE OF PROPERTIES

1

SECTION 1612.

PAYMENT OF TAXES; DISCHARGE OF LIENS

1

SECTION 1613.

INSURANCE

1

SECTION 1614.

RECORDING, FILING, ETC

1

SECTION 1615.

EFFECTIVE TIME FOR CERTAIN PROVISIONS

1

- v -

i.

YANKEE GAS SERVICES COMPANY

Reconciliation and tie between Trust Indenture Act of 1939 and Mortgage, as amended through ______________.

Trust Indenture Act Section Mortgage Section

- vi -

§§ 310  (a)(1)              (a)(2)              (a)(3)              (a)(4)              (b) §§ 311  (a)              (b)              (c) §§ 312  (a)              (b)              (c) §§ 313  (a)              (b)(1)              (b)(2)              (c)              (d) §§ 314  (a)              (a)(4)              (b)....              (c)(1)              (c)(2)              (c)(3)              (d).....              (e)..... §§ 315  (a).....              (b).....              (c).....              (d).....              (d)(1).              (d)(2).              (d)(3).              (e)...... §§ 316  (a).....              (a)(1)(A)              (a)(1)(B)              (a)(2)......              (b)..........  §§ 317 (a)(1)              (a)(2).              (b)..... §§ 318  (a)..... 1009 1009 1014 Not Applicable 1008, 1010 1013 1013 Not Applicable 1101 1101 1101 1102 Not Applicable 1102 1102 1102 1102 705 1614 103 103 Not Applicable 1610 103 1001(a) 1002 1001(b) 1001(c) 1001(a), 1001(c) 1001(c) 1001(c) 914 912, 913 902, 912 913 Not Applicable 908 903 904 703 108

- vii -

THIS INDENTURE OF MORTGAGE AND DEED OF TRUST (hereinafter referred to as this “Mortgage”), dated as of the first day of July, 1989, between YANKEE GAS SERVICES COMPANY, a specially chartered corporation of the State of Connecticut (hereinafter called the “Company”), and The Bank of New York Mellon Trust Company, N.A. (Formerly known as The Bank of New York Trust Company, successor Trustee to Fleet National Bank, formerly known as The Connecticut National Bank) (hereinafter called the "Trustee").

RECITALS OF THE COMPANY

The Company has duly authorized the creation, execution and delivery from time to time of its bonds, notes or other evidences of indebtedness of substantially the tenor hereinafter provided (hereinafter called the "Securities"), issuable in one or more series; and, to secure the Securities and to provide for their authentication and delivery by the Trustee, the Company has duly authorized the execution and delivery of this Mortgage.

All things have been done which are necessary to make the Securities, when executed by the Company and authenticated and delivered by the Trustee hereunder and duly issued by the Company, the valid obligations of the Company, and to constitute this indenture a valid mortgage and deed of trust and a security agreement and contract for the security of the Securities, in accordance with the terms of the Securities and this Mortgage.

GRANTING CLAUSES

NOW, THEREFORE, THIS MORTGAGE WITNESSETH, that, to secure the payment of the principal of (and premium, if any) and interest on the Securities Outstanding (as hereinafter defined) and the performance of the covenants therein and herein contained and to declare the terms and conditions on which the Securities Outstanding are secured, and in consideration of the premises and of the purchase of the Securities by the Holders thereof, the Company by these presents does grant, bargain, sell, alien, remise, release, convey, assign, transfer, mortgage, hypothecate, pledge, set over and confirm to the Trustee, all property, rights, privileges and franchises of the Company of every kind and description, real, personal or mixed, tangible and intangible, whether now owned or hereafter acquired by the Company, wherever located, and grants a security interest therein for the purposes herein expressed, except any Excepted Property (as hereinafter defined) hereinafter expressly excepted from the lien hereof, and including, without limitation, all and singular the following:

GRANTING CLAUSE FIRST

All the property, rights, privileges and franchises particularly described in annexed Schedule A are hereby made a part of, and deemed to be described in, this Granting Clause as fully as if set forth in this Granting Clause at length.

GRANTING CLAUSE SECOND

Subject to the applicable exceptions, if any, permitted by Article Twelve, all other property, real, personal or mixed (other than "Excepted Property"), of every kind and description and wheresoever situate, now owned or which may be hereafter acquired by the Company, including, without limitation, plant, equipment, apparatus, transmission and pipe lines and distribution systems, it being the intention hereof that all property, rights, privileges and franchises now owned by the Company or acquired by the Company after the date hereof, (other than Excepted Property) shall be as fully embraced within and subjected to the lien hereof, as if such property were specifically described herein.

GRANTING CLAUSE THIRD

Also any Excepted Property that may, from time to time hereafter, by delivery or by writing of any kind, be subjected to the lien hereof by the Company or by anyone in its behalf; and the Trustee is hereby authorized to receive the same at any time as additional security hereunder.  Such subjection to the lien hereof of any Excepted Property as additional security may be made subject to any reservations, limitations or conditions which shall be set forth in a written instrument executed by the Company or the person so acting in its behalf or by the Trustee respecting the use and disposition of such property or the proceeds thereof.

GRANTING CLAUSE FOURTH

Together with (subject to the rights of the Company set forth in Section 1601) all the rents, issues, profits, revenues and other income and proceeds of the property subjected or required to be subjected to the lien of this Mortgage, and all the estate, right, title and interest of every nature whatsoever of the Company in and to the same and every part thereof.

EXCEPTED PROPERTY

There is, however, expressly excepted and excluded from the Lien of this Mortgage all right, title and interest of the Company in and to the following property, whether now owned or hereafter acquired (herein prior to the Second Effective Date sometimes called “Excepted Property”); provided, however, that at any time after compliance by the Company with the requirements set forth in Section 1601(b), the term “Excepted Property” shall mean the property described in clause (B) of the term “Excepted Property” set forth in Section 101, and the remainder of this paragraph shall automatically cease to be of any further force or effect:

(a)

all cash on hand or in banks, contracts, agreements, shares of stock, bonds, notes, evidences of indebtedness and other securities, bills, notes, contract rights and accounts receivable, permits and licenses, patents, patent licenses and other patent rights, patent applications, trade names, trademarks, claims, credits, chooses in action, and other general intangibles, other than property referred to in this subdivision which is specifically described in Schedule A referred to in Granting Clause First or is by the express provisions of this Mortgage subjected or required to be subjected to the lien hereof;

2

(b)

all automobiles, buses, trucks, truck cranes, tractors, trailers and similar vehicles and movable equipment, all vessels and aircraft, and all accessories and supplies used in connection with any of the foregoing;

(c)

all products, goods, wares and merchandise acquired for the purpose of sale in the ordinary course of business, including all natural and manufactured gas supplies and inventory, whether in the ground or in transmission, storage or distribution; and all fuel, materials and supplies and other personal property which are consumable (otherwise than by ordinary wear and tear) in their use in the operation of the business of the Company;

(d)

all office furniture and equipment, small tools and equipment and machinery of portable size, computer equipment, systems and programs, and all leasehold interests pertaining thereto;

(e)

all leasehold interests of the Company under leases for a term (including any period for which the Company shall have a right of renewal) of less than one year;

(f)

the last day of the term of each leasehold estate otherwise subject to the lien of this Mortgage;

(g)

all rents, issues, profits, revenues and other income and proceeds of any property not subjected or required to be subjected to the lien of this Mortgage now or hereafter owned, leased or operated by the Company;

(h)

all permits, licenses, franchises and rights not specifically subjected or required to be subjected to the lien hereof by the express provisions of this Mortgage, whether now owned or hereafter acquired by the Company, which by their terms or by reason of applicable law would become void or voidable if mortgaged or pledged hereunder by the Company or which can not be granted, conveyed, mortgaged, transferred or assigned by this Mortgage without the consent of other parties whose consent is not secured, or without subjecting the Trustee to a liability not otherwise contemplated by the provisions of this Mortgage, or which otherwise may not be, or are not, hereby lawfully and effectively granted, conveyed, mortgaged, transferred and assigned by the Company (including, without limitation, the Company's franchise to be a public service company) ;

It is the intention and it is hereby agreed that all property of the kind hereinbefore described acquired by the Company after the date hereof, shall, except as otherwise provided herein, be as fully embraced within the provisions of this Mortgage, and subject to the lien hereby created, as if the said property were now owned by the Company, and were specifically described herein and conveyed hereby.

TO HAVE AND TO HOLD all said property, rights, privileges and franchises of every kind and description, real, personal or mixed, hereby and hereafter (by supplemental indenture or otherwise) granted, bargained, sold, aliened, remised, released, conveyed, assigned, transferred, mortgaged, hypothecated, pledged, set over or confirmed as aforesaid, or intended, agreed or covenanted so to be, together with all the appurtenances thereto appertaining (said properties, rights, privileges and franchises, including any cash

3

and securities hereafter deposited or required to be deposited with the Trustee (other than any such cash which is specifically stated herein not to be deemed part of the Mortgaged Property), being herein collectively called "Mortgaged Property") unto the Trustee and its successors and assigns forever.

SUBJECT, HOWEVER, to Permitted Liens (as defined in Section 101).

BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of the Holders from time to time of all the Outstanding Securities without any preference or priority of any such Security over any other such Security.

UPON CONDITION that, until the happening of an Event of Default (as defined in Section 101) and subject to the provisions of Article Sixteen, the Company shall be permitted to possess and use the Mortgaged Property, except cash, securities and other personal property deposited and pledged, or required to be deposited and pledged, with the Trustee, and to receive and use the rents, issues, profits, revenues and other income of the Mortgaged Property.

AND IT IS HEREBY COVENANTED AND DECLARED that all the Securities are to be authenticated and delivered and the Mortgaged Property is to be held and applied by the Trustee, subject to the further covenants, conditions and trusts hereinafter set forth, and the Company does hereby covenant and agree to and with the Trustee, for the equal and proportionate benefit of all Holders of the Securities as follows:

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

SECTION 101.

DEFINITIONS.

For all purposes of this Mortgage, except as otherwise expressly provided or unless the context otherwise requires:

(a)

the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

(b)

all terms used herein without definition which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;

(c)

all terms used herein without definition which are defined in the Uniform Commercial Code of Connecticut as in effect on the First Effective Date shall have the meanings assigned to them therein;

(d)

all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder

4

shall mean such accounting principles as are generally accepted in the United States at the date of such computation or, at the election of the Company from time to time, at the First Effective Date; provided, however, that in determining generally accepted accounting principles applicable to the Company, effect shall be given, to the extent required, to any order, rule or regulation of any administrative agency, regulatory authority or other governmental body having jurisdiction over the Company; and provided, further, that to the extent the Company elects to use a computation that is not based on accounting principles that are generally accepted in the United States on the date of such computation, the Company shall so state and shall certify that such principles were in effect at the First Effective Date;

(e)

the table of contents and headings are for reference purposes only and shall not in any way affect the meaning or interpretation of this Mortgage.  

(f)

The terms and provisions hereof that have no force or effect before the Second Effective Date shall not in any way affect the meaning or interpretation of any provisions hereof that shall be in effect on and after the First Effective Date and, correspondingly, the terms and provisions hereof that have no force and effect after the Second Effective Date shall not in any way affect the meaning or interpretation of any provisions hereof that shall be in effect on and after the Second Effective Date;

(g)

any reference to an “Article” or a “Section” refers to an Article or a Section, as the case may be, of this Mortgage; and

(h)

the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Mortgage as a whole and not to any particular Article, Section or other subdivision.

“ACCOUNTANT” means a person engaged in the accounting profession or otherwise qualified to pass on accounting matters (including, but not limited to, a Person certified or licensed as a public accountant, whether or not then engaged in the public accounting profession), which Person, unless required to be Independent, may be an employee or Affiliate of the Company.

“ACT”, when used with respect to any Holder of a Security, has the meaning specified in Section 105.

“AFFILIATE” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For the purposes of this definition, “CONTROL” when used with respect to any specified Person means the power to direct generally the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “CONTROLLING” and “CONTROLLED” have meanings correlative to the foregoing.

5

“AUTHENTICATING AGENT” means any Person or Persons (other than the Company or an Affiliate of the Company) authorized by the Trustee to act on behalf of the Trustee to authenticate the Securities of one or more series.

“AUTHORIZED OFFICER” means the Chairman of the Board, the Vice Chairman, the President, any Vice President, the Treasurer, any Assistant Treasurer, or any other officer, manager or agent of the Company duly authorized pursuant to a Board Resolution to act in respect of matters relating to this Mortgage.

“AVAILABLE CASH”, at any time, shall mean all cash then held by, or deposited with, the Trustee other than cash so held or deposited pursuant to Section 307 or Article Eight.

“BOARD OF DIRECTORS” means either the board of directors, board of managers or similar governing body of the Company or any committee thereof duly authorized to act in respect of matters relating to this Mortgage.

“BOARD RESOLUTION” means a copy of a resolution certified by the Secretary, an Assistant Secretary or an Authorized Officer of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“BUSINESS DAY”, when used with respect to a Place of Payment or any other particular location specified in the Securities or this Mortgage, means any day, other than a Saturday or Sunday, which is not a day on which banking institutions or trust companies in such Place of Payment or other location, or in the place in which the Corporate Trust Office is located, are generally authorized or required by law, regulation or executive order to remain closed, except as may be otherwise specified as contemplated by Section 301.

“CAPITALIZED LEASE LIABILITIES” means, with respect to any Person, the amount, if any, shown as liabilities on such Person’s unconsolidated balance sheet for capitalized leases of natural gas transmission, distribution and storage property not owned by such Person, which amount shall be determined in accordance with generally accepted accounting principles and practices applicable to the type of business in which such Person is engaged.

“COMMISSION” means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the First Effective Date such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body, if any, performing such duties at such time.

“COMPANY” means the Person named as the “Company” in the first paragraph of this Mortgage until a successor Person shall have become such pursuant to the applicable provisions of this Mortgage, and thereafter “Company” shall mean such successor Person.

“COMPANY ORDER” or “COMPANY REQUEST” means, respectively, a written order or request, as the case may be, signed in the name of the Company by an Authorized Officer and delivered to the Trustee.

6

“CORPORATE TRUST OFFICE” means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the First Effective Date is located at ______________.

“CORPORATION” means a corporation, association, company, limited liability company, partnership, limited partnership, joint stock company or business trust, and references to “corporate” and other derivations of “corporation” herein shall be deemed to include appropriate derivations of such entities.

“COST” with respect to Property Additions has the meaning specified in Section 102.

“DEBT”, with respect to any Person, means, without duplication, (A) indebtedness of such Person for borrowed money evidenced by a bond, debenture, note or other written instrument or agreement by which such Person is obligated to repay such borrowed money, (B) any guaranty by such Person of any such indebtedness of another Person, and (C) any Capitalized Lease Liabilities of such Person.  “Debt” does not include, among other things, (w) indebtedness of such person under any installment sale or conditional sale agreement or any other agreement relating to indebtedness for the deferred purchase price of property or services, (x) any trade obligation (including obligations under power or other commodity purchase agreements and any hedges or derivatives associated therewith), or other obligations of such Person in the ordinary course of business, (y) obligations of such Person under any lease agreement that a re not Capitalized Lease Liabilities, or (z) any Liens securing indebtedness, neither assumed nor guaranteed by such Person nor on which it customarily pays interest, existing upon real estate or rights in or relating to real estate acquired by such Person for substation, transmission line, transportation line, distribution line or right of way purposes.

“DEFAULTED INTEREST” has the meaning specified in Section 307.

“DISCOUNT SECURITY” means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 902.  “Interest” with respect to a Discount Security means interest, if any, borne by such Security at a Stated Interest Rate.

“DOLLAR” or “$” means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts.

“ELIGIBLE OBLIGATIONS” means:

(a)

with respect to Securities denominated in Dollars, Government Obligations or, if specified pursuant to Section 301 with respect to any Securities, other Investment Securities; or

(b)

with respect to Securities denominated in a currency other than Dollars or in a composite currency, such other obligations or instruments as shall be specified with respect to such Securities, as contemplated by Section 301.

7

“EVENT OF DEFAULT” has the meaning specified in Section 901.

“EXCEPTED PROPERTY”,

(A)

at any time prior to compliance by the Company with the requirements of Section 1601(b), the term “Excepted Property” has the meaning specified in the granting clauses of this Mortgage; provided, however, that on and after such compliance with Section 1601(b), the term “Excepted Property” shall have the meaning set forth in clause (B) below, and the definition of “Excepted Property” set forth in this clause (A) shall automatically cease to be of any further force or effect;

(B)

at any time after compliance by the Company with the requirements set forth in Section 1601(b), the term “Excepted Property” shall mean the property described below in this clause (B); provided, however, that until such compliance with Section 1601(b), the definition of the term “Excepted Property” set forth in this clause (B) shall be of no force or effect but shall automatically become and be in full force and effect upon such compliance with Section 1601(b):

(i)

all cash on hand or in banks or other financial institutions, deposit accounts, securities accounts, shares of stock, interests in business trusts or general or limited partnerships or limited liability companies, bonds, notes, mortgages, other evidences of indebtedness and other securities, security entitlements and investment property, of whatsoever kind and nature, not hereafter paid or delivered to, deposited with or held by the Trustee hereunder or required so to be;

(ii)

all rights, contracts, leases, operating agreements and other agreements of whatsoever kind and nature; all contract rights, bills, notes and other instruments and chattel paper (except to the extent that any of the same constitute securities, security entitlements or investment property, in which case they are separately excepted from the Lien of this Mortgage under clause (i) above); all revenues, income and earnings, all accounts, accounts receivable, rights to payment, payment intangibles and unbilled revenues, transition property, and all rents, tolls, earnings, issues, product and profits, revenues, dividends, income, claims, credits, demands and judgments; all governmental and other licenses, permits, franchises, consents and allowances; and all patents, patent licenses and other patent rights, patent applications, trade names, trademarks, copyrights and other intellectual property; and all claims, credits, choses in actio n, commercial tort claims and other intangible property and general intangibles including, but not limited to, computer software;

(iii)

all automobiles, buses, trucks, truck cranes, tractors, trailers and similar vehicles and movable equipment; all rolling stock, rail cars and other railroad equipment; all vessels, boats, barges, and other marine equipment; all airplanes, helicopters, aircraft engines and other flight equipment; all parts, accessories and supplies used in connection with any of the foregoing; and all personal property of such character that the perfection of a security interest therein or other Lien thereon is not governed by the Uniform Commercial Code as in effect in the jurisdiction in which such property is located;

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(iv)

all goods, stock in trade, wares, merchandise and inventory held for the purpose of sale or lease in the ordinary course of business; all materials, supplies, inventory and other items of personal property which are consumable (otherwise than by ordinary wear and tear) in their use in the operation of the Mortgaged Property; all fuel, including nuclear fuel, whether or not any such fuel is in a form consumable in the operation of the Mortgaged Property, including separate components of any fuel in the forms in which such components exist at any time before, during or after the period of the use thereof as fuel; all hand and other portable tools and equipment; all furniture and furnishings; and computers and data processing, data storage, data transmission, telecommunications and other facilities, equipment and apparatus, which, in any case, are used primarily for administrative or clerical purposes or are otherwise not necessary for the operation or maintenance of the facilities, machinery, equipment or fixtures described or referred to in the Granting Clauses of this Mortgage;

(v)

all coal, lignite, ore, gas, oil and other minerals and all timber, and all rights and interests in any of the foregoing, whether or not such minerals or timber shall have been mined or extracted or otherwise separated from the land; and all electric energy and capacity, gas (natural or artificial), steam, water and other products generated, produced, manufactured, purchased or otherwise acquired by the Company;

(vi)

all real property, leaseholds, gas rights, wells, gathering, tap or other pipe lines, or facilities, equipment or apparatus, in any case used or to be used primarily for the production or gathering of natural gas;

(vii)

all property which is the subject of a lease agreement designating the Company as lessee and all right, title and interest of the Company in and to such property and in, to and under such lease agreement, whether or not such lease agreement is intended as security;

(viii)

all property, real, personal and mixed, which prior to the Second Effective Date has been released from the Lien of the Mortgage;

(ix)

all property, real, personal and mixed, which subsequent to the Second Effective Date, has been released from the Lien of this Mortgage, and any improvements, extensions and additions to such properties and renewals, replacements and substitutions of or for any parts thereof;

(x)

all leasehold interests, permits, licenses and similar rights, whether now owned or hereafter acquired by the Company, which are intended to be hereby conveyed, transferred or assigned and which may not be legally so conveyed, transferred or assigned, or which cannot be so conveyed, transferred or assigned without the consent of other parties whose consent is not secured or without subjecting the Trustee to a liability not otherwise contemplated by the provisions of the Mortgage or which otherwise may not be hereby lawfully and/or effectively granted, conveyed, mortgaged, transferred and assigned by the Company;

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(xi)

the last day of the term of each leasehold estate (oral or written, or any agreement therefor) then owned or thereafter acquired by the Company;    and

(xii)

all property not acquired or constructed by the Company for use in its natural gas storage, transmission and distribution business;

provided, however, that, at any time on and after the Second Effective Date, subject to the provisions of Section 1203, (A) if, at any time after the occurrence of an Event of Default, the Trustee, or any separate trustee or co-trustee appointed under Section 1014 or any receiver appointed pursuant to Section 917 or otherwise, shall have entered into possession of all or substantially all the Mortgaged Property, to the extent permitted by law, all the Excepted Property described or referred to in the foregoing clauses (iii) and (v) then owned or held or thereafter acquired by the Company, to the extent that the same is used in connection with, or otherwise relates or is attributable to, the Mortgaged Property, shall immediately, and, in the case of any Excepted Property described or referred to in clause (vii), to the extent that the same is used in connection with, or otherwise relates or is attributable to, the Mortgaged Property, be come subject to the Lien of this Mortgage, junior and subordinate to any Liens at that time existing on such Excepted Property, and the Trustee or such other trustee or receiver may, to the extent permitted by law or by the terms of any such other Lien (and subject to the rights of the holders of all such other Liens), at the same time likewise take possession thereof, (B) whenever all Events of Default shall have been cured and the possession of all or substantially all of the Mortgaged Property shall have been restored to the Company, such Excepted Property shall again be excepted and excluded from the Lien hereof to the extent set forth above; it being understood that the Company may, however, pursuant to any future amendment to this Mortgage subject any Excepted Property to the Lien of this Mortgage whereupon the same shall cease to be Excepted Property, and (C) to the extent not prohibited by any other provision of the Mortgage, nothing contained in the release herein provided for shall prevent the Comp any, prior to any such entering into possession, from selling, assigning, transferring, pledging or otherwise disposing of property of the character thereby released from the lien hereof by this paragraph and in any such case the title, possession or other rights of the purchaser, assignee or transferee thereof shall be free and clear of such lien as would otherwise attach under the Mortgage in the event of such entering into possession.

“EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended.

 “EXPERT” means a Person which is an engineer, appraiser or other expert and which, with respect to any certificate to be signed by such Person and delivered to the Trustee, is qualified to pass upon the matters set forth in such certificate.  For purposes of this definition, (a) “engineer” means a Person engaged in the engineering profession or otherwise qualified to pass upon engineering matters (including, but not limited to, a Person licensed as a professional engineer, whether or not then engaged in the engineering profession) and (b) “appraiser” means a Person engaged in the business of appraising property or otherwise qualified to pass upon the Fair Value or fair market value of property.

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“EXPERTS’ CERTIFICATE” means a certificate signed by an Authorized Officer, by an Accountant and by an Expert (which Accountant and Expert (a) shall be selected either by the Board of Directors or by an Authorized Officer, the execution of such certificate by such Authorized Officer to be conclusive evidence of such selection, and (b) except as otherwise required in Sections 401 and 1610, may be an employee or Affiliate of the Company) and delivered to the Trustee.  The amount stated in any Experts’ Certificate as to the Cost, Fair Value or fair market value of property shall be conclusive and binding upon the Company, the Trustee and the Holders of the Securities.

“FAIR VALUE”, with respect to property, means the fair value of such property as determined in the reasonable judgment of the Expert certifying to such value, such determination to be based on any one or more factors deemed relevant by such Expert including, without limitation, (a) the amount which would be likely to be obtained in an arm’s-length transaction with respect to such property between an informed and willing buyer and an informed and willing seller, under no compulsion, respectively, to buy or sell, (b) the amount of investment with respect to such property which, together with a reasonable return thereon, would be likely to be recovered through ordinary business operations or otherwise, (c) the Cost, accumulated depreciation, and replacement cost with respect to such property and/or (d) any other relevant factors; provided, however, that (x) the Fair Value of property shall be determined without deduct ion for any Liens on such property prior to the Lien of this Mortgage (except as otherwise provided in Section 1603) and (y) the Fair Value to the Company of Property Additions may be of less value to a Person which is not the owner or operator of the Mortgaged Property or any portion thereof than to a Person which is such owner or operator.  Fair Value may be determined, without physical inspection, by the use of accounting and engineering records and other data maintained by the Company or otherwise available to the Expert certifying the same.

“FIRST EFFECTIVE DATE” means the date [__________].  

“GAS UTILITY PROPERTY” means any facilities, machinery, equipment and fixtures for the storage, transmission and distribution of natural gas, including ____________________, and all other property of the Company, real or personal, or improvements, extensions, additions, renewals or replacements of the foregoing, in each case used or useful or to be used in or in connection with the business of storing, transmission and distribution of natural gas of the character described in the Granting Clauses of this Mortgage, whether owned by the Company at the First Effective Date or hereafter acquired (other than Excepted Property with respect to all of the property described in this definition).

“GOVERNMENTAL AUTHORITY” means the government of the United States or of any State or Territory thereof or of the District of Columbia or of any county, municipality or other political subdivision of any thereof, or any department, agency, authority or other instrumentality of any of the foregoing.

“GOVERNMENT OBLIGATIONS” means securities which are (a) (i) direct obligations of the United States where the payment or payments thereunder are supported by the full faith and credit of the United States or (ii) obligations of a Person controlled or

11

supervised by and acting as an agency or instrumentality of the United States where the timely payment or payments thereunder are unconditionally guaranteed as a full faith and credit obligation by the United States or (b) depository receipts issued by a bank (as defined in Section 3(a)(2) of the Securities Act, which may include the Trustee or any Authenticating Agent or Paying Agent) as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of or other amount with respect to any such Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of or other amount wit h respect to the Government Obligation evidenced by such depository receipt.

“HOLDER” means a Person in whose name a Security is registered in the Security Register.

“INDEPENDENT”, when applied to any Accountant or Expert, means such a Person who (a) is in fact independent, (b) does not have any direct material financial interest in the Company or in any other obligor upon the Securities or in any Affiliate of the Company or of such other obligor, (c) is not connected with the Company or such other obligor as an officer, employee, promoter, underwriter, trustee, partner, director or any person performing similar functions and (d) shall be acceptable to the Trustee.

“INDEPENDENT EXPERTS’ CERTIFICATE” means a certificate signed by an Expert who is Independent and delivered to the Trustee.

“INTEREST” with respect to a Discount Security means interest, if any, borne by such Security at a Stated Interest Rate rather than interest calculated at any imputed rate.

“INTEREST PAYMENT DATE”, when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security.

“INVESTMENT SECURITIES” means any of the following obligations or securities on which neither the Company, any other obligor on the Securities nor any Affiliate of either is the obligor: (a) Government Obligations; (b) interest bearing deposit accounts (which may be represented by certificates of deposit) in any national or state bank (which may include the Trustee or any Authenticating Agent or Paying Agent) or savings and loan association whose outstanding securities (or securities of the bank holding company owning all of the capital stock of such bank or savings and loan association) are rated by a nationally recognized rating organization in either of the two highest rating categories (without regard to modifiers) for short-term securities or in any of the three highest rating categories (without regard to modifiers) for long-term securities; (c) bankers’ acceptances drawn on and accepted by any commercial ban k (which may include the Trustee or any Authenticating Agent or Paying Agent) whose outstanding securities (or securities of the bank holding company owning all of the capital stock of such commercial bank) are rated by a nationally recognized rating organization in either of the two highest rating categories (without regard to modifiers) for short-term securities or in any of the

12

three highest rating categories (without regard to modifiers) for long-term securities; (d) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, any State or Territory of the United States or the District of Columbia, or any political subdivision of any of the foregoing, which are rated by a nationally recognized rating organization in either of the two highest rating categories (without regard to modifiers) for short-term securities or in any of the three highest rating categories (without regard to modifiers) for long-term securities; (e) bonds or other obligations of any agency or instrumentality of the United States; (f) corporate debt securities which are rated by a nationally recognized rating organization in either of the two highest rating categories (without regard to modifiers) for short-term securities or in any of the three highest rating categories (without regard to modifiers ) for long-term securities; (g) repurchase agreements with respect to any of the foregoing obligations or securities with any banking or financial institution (which may include the Trustee or any Authenticating Agent or Paying Agent) whose outstanding securities (or securities of the bank holding company owning all of the capital stock of such bank or financial institution) are rated by a nationally recognized rating organization in either of the two highest rating categories (without regard to modifiers) for short-term securities or in any of the three highest rating categories (without regard to modifiers) for long-term securities; (h) securities issued by any regulated investment company (including any investment company for which the Trustee or any Authenticating Agent or Paying Agent is the advisor), as defined in Section 851 of the Internal Revenue Code of 1986, as amended, or any successor section of such Code or successor federal statute, provided that the portfolio of such investment company is lim ited to obligations or securities of the character and investment quality contemplated in clauses (a) through (f) above and repurchase agreements which are fully collateralized by any of such obligations or securities; and (i) any other obligations or securities which may lawfully be purchased by the Trustee in its capacity as such.

“LIEN” means any mortgage, deed of trust, pledge, security interest, encumbrance, easement, lease, reservation, restriction, servitude, charge or similar right and any other lien of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and any defect, irregularity, exception or limitation in record title.

“MATURITY”, when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as provided in such Security or in this Mortgage, whether at the Stated Maturity, by declaration of acceleration, upon call for redemption or otherwise.

“MORTGAGE” means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more Mortgages supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental Mortgage, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Mortgage and any such supplemental Mortgage, respectively.  The term “Mortgage” shall also include the provisions or terms of particular series of Securities established in any Officers’ Certificate, Board Resolution or Company Order delivered pursuant to Sections 201, 301, 303 and 1307.

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“MORTGAGED PROPERTY” has the meaning stated in the habendum to the Granting Clauses and means, as of any particular time, all property which at such time is subject to the Lien of this Mortgage.

“NOTICE OF DEFAULT” means a written notice of the kind specified in Section 901(c).

“OFFICERS’ CERTIFICATE” means a certificate signed by any two Authorized Officers of the Company and delivered to the Trustee.

“OPINION OF COUNSEL” means a written opinion of counsel, who may be counsel for the Company.

“ORIGINAL INDENTURE” means the Indenture of Mortgage and Deed of Trust, dated as of July 1, 1989, executed and delivered by the Company to The Bank of New York Trust Company, N.A. (successor as trustee to the Bank of New York, successor to Fleet National Bank, formerly known as The Connecticut National Bank), as Trustee, and any and all Supplemental Indentures thereto dated as of a date prior to the First Effective Date.

 “OUTSTANDING”, when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Mortgage, except:

(a)

Securities theretofore canceled or delivered to the Security Registrar for cancellation;

(b)

Securities deemed to have been paid for all purposes of this Mortgage in accordance with Section 801 (whether or not the Company’s indebtedness in respect thereof shall be satisfied and discharged for any other purpose); and

(c)

Securities, the principal, premium, if any, and interest, if any, which have been fully paid pursuant to the third paragraph of Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Mortgage, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it and the Company that such Securities are held by a bona fide purchaser or purchasers in whose hands such Securities are valid obligations of the Company;

provided, however, that, from and after the First Effective Date but before the Second Effective Date, in determining whether the Holders of the requisite principal amount of Securities Outstanding have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee knows to be so owned shall be so disregarded.  Securities so owned which have

14

been pledged in good faith may be regarded as Outstanding for such purposes if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor;

and provided further, that, from and after the Second Effective Date, in determining whether or not the Holders of the requisite principal amount of the Securities Outstanding under this Mortgage, or the Securities Outstanding of any series or Tranche, have given any request, demand, authorization, direction, notice, consent or waiver hereunder or whether or not a quorum is present at a meeting of Holders of Securities,

(x)

Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor (unless the Company, such Affiliate or such obligor owns all Securities Outstanding under this Mortgage, or (except for the purposes of actions to be taken by Holders of more than one series or more than one Tranche, as the case may be, voting as a class under Section 1302) all Securities Outstanding of each such series and each such Tranche, as the case may be, determined without regard to this clause (x)) shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver or upon any such determination as to the presence of a quorum, only Securities which the Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded; provide d, however, that Securities so owned which have been pledged in good faith may be regarded as Outstanding if it is established to the reasonable satisfaction of the Trustee that the pledgee, and not the Company, or any such other obligor or Affiliate of either thereof, has the right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor; and provided, further, that in no event shall any Security which shall have been delivered to evidence or secure, in whole or in part, the Company’s obligations in respect of other indebtedness be deemed to be owned by the Company if the principal of such Security is payable, whether at Stated Maturity or upon mandatory redemption, at the same time as the principal of such other indebtedness is payable, whether at Stated Maturity or upon mandatory redemption or acceleration, but only to the extent of such portion of the principal amount of such Se curity as does not exceed the principal amount of such other indebtedness, and

(y)

the principal amount of a Discount Security that shall be deemed to be Outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the Maturity thereof pursuant to Section 902; and

(z)

the principal amount of any Security which is denominated in a currency other than Dollars or in a composite currency that shall be deemed to be Outstanding for such purposes shall be the amount of Dollars which could have been purchased by the principal amount (or, in the case of a Discount Security, the Dollar equivalent on the date determined as set forth below of the amount determined as provided in (y) above) of such currency or composite currency evidenced by such Security, in each such case certified to

15

the Trustee in an Officers’ Certificate, based (i) on the average of the mean of the buying and selling spot rates quoted by three banks which are members of the New York Clearing House Association selected by the Company in effect at 11:00 A.M. (New York time) in The City of New York on the fifth Business Day preceding any such determination or (ii) if on such fifth Business Day it shall not be possible or practicable to obtain such quotations from such three banks, on such other quotations or alternative methods of determination which shall be as consistent as practicable with the method set forth in (i) above;

and provided, further, that in the case of any Security the principal of which is payable from time to time without presentment or surrender, the principal amount of such Security that shall be deemed to be Outstanding at any time for all purposes of this Mortgage shall be the original principal amount thereof less the aggregate amount of principal thereof theretofore paid.

“OUTSTANDING”, when used with respect to Secured Debt, means, as of the date of determination, all Secured Debt authenticated and delivered by the trustee or other holder of the Prior Lien securing the same or, if there be no such trustee or other holder, theretofore made and delivered or incurred by the Company, except:

(a)

Secured Debt theretofore cancelled or delivered to the trustee or other holder of any such Prior Lien for cancellation;

(b)

Secured Debt which has been fully paid or deemed to have been fully paid;

(c)

Secured Debt held by the Trustee subject to the provisions of Section 1608 hereof;

(d)

Secured Debt held by the trustee or other holder of a Prior Lien upon the same property as that mortgaged or pledged to secure the Secured Debt so held (under conditions such that no transfer of ownership or possession of such Secured Debt by the trustee or other holder of such Prior Lien is permissible otherwise than to the Trustee to be held subject to the provisions of Section 1608 hereof, or to the trustee or other holder of some other Prior Lien upon the same property for cancellation or to be held uncancelled under the terms of such other Prior Lien under like conditions);

(e)

Secured Debt secured by a Prepaid Lien; and

(f)

lost, stolen or destroyed Secured Debt in lieu of or in substitution for which other Secured Debt shall have been authenticated and delivered.

“PAYING AGENT” means any Person, including the Company, authorized by the Company to pay the principal of, and premium, if any, or interest, if any, on any Securities on behalf of the Company.

“PERIODIC OFFERING” means an offering of Securities of a series from time to time any or all of the specific terms of which Securities, including without limitation the rate or rates of interest, if any, thereon, the Stated Maturity or Maturities thereof and the

16

redemption provisions, if any, with respect thereto, are to be determined by the Company or its agents from time to time subsequent to the initial request for the authentication and delivery of such Securities by the Trustee, as contemplated in Section 301 and clause (b) of Section 303.

“PERMITTED LIENS”

(A)

at any time prior to the Second Effective Date, the term “Permitted Liens” shall, with respect to Mortgaged Property, mean any of the following; provided, however that on and after the Second Effective Date, the term “Permitted Liens” shall have the meaning set forth in clause (B) below and the definition of Permitted Liens set forth in this clause (A) shall automatically cease to be of any further force or effect:

(i)

as to the property specifically described in Granting Clause First, the restrictions, exceptions, reservations, conditions, limitations, interests and other matters which are set forth or referred to in such descriptions;

(ii)

liens for taxes, assessments and other governmental charges not delinquent;

(iii)

liens for taxes, assessments and other governmental charges already delinquent which are currently being contested in good faith by appropriate proceedings, provided the Company shall have set aside on its books adequate reserves with respect thereto;

(iv)

mechanics' and materialmen's liens not filed of record and similar charges not delinquent, incident to current construction, and mechanics' and materialmen's liens incident to such construction which are filed of record but which are being contested in good faith and have not proceeded to judgment and as to which the Company shall have set aside on its books adequate reserves with respect thereto;

(v)

liens in respect of judgments or awards with respect to which the Company shall in good faith currently be prosecuting an appeal or proceedings for review and with respect to which the Company shall have secured a stay of execution pending such appeal or proceedings for review, provided the Company shall have set aside on its books adequate reserves with respect thereto;

(vi)

easements and rights of way granted by the Company that, in the opinion of the Board of Directors, will not impair the usefulness of such property in the conduct of the Company's business and will not be prejudicial to the interests of the Holders; provided, that, if the Company shall be entitled to receive any money or property as consideration or compensation for such grant, forthwith upon its receipt by the Company, such money to the extent it exceeds $100,000 shall be deposited with the Trustee (unless otherwise required by a

17

Prior Lien) and any such property shall otherwise be subjected to the Lien of this Mortgage;

(vii)

easements, leases, reservations or other rights of others in any property of the Company for streets, roads, bridges, pipes, pipe lines, railroads, electric transmission and distribution lines, telegraph and telephone lines, the removal of oil, gas, coal or other minerals and other similar purposes, flood rights, river control and development rights, sewage and drainage rights, restrictions against pollution and zoning laws and defects and irregularities in the record evidence of title, provided that such easements, leases, reservations, rights, restrictions, laws, defects and irregularities do not in the aggregate materially impair the use of the Mortgaged Property taken as a whole for the purposes for which it is held by the Company;

(viii)

liens securing indebtedness neither created, assumed nor guaranteed by the Company nor on account of which it customarily pays interest, existing at the date of this instrument, or, as to property hereafter acquired, at the time of acquisition by the Company, upon lands over which easements or rights of way are acquired by the Company for any of the purposes specified in clause (vii) of this definition, which liens do not materially impair the use of such easements or rights of way for the purposes for which they are held by the Company;

(ix)

terminable or short term leases or permits for occupancy, which leases or permits expressly grant to the Company the right to terminate them at any time on not more than 90 days' notice and which occupancy does not interfere with the operation of the business of the Company;

(x)

any lien or privilege vested in any lessor, licensor or permitter for rent to become due or for other obligations or acts to be performed, the payment of which rent or the performance of which other obligations or acts is required under leases, subleases, licenses or permits, so long as the payment of such rent or the performance of such other obligations or acts is not delinquent;

(xi)

the burdens of any law or governmental regulation or permit requiring the Company to maintain certain facilities or perform certain acts as a condition of its occupancy of or interference with any public lands or any river or stream or navigable waters;

(xii)

any irregularities in or deficiencies of title to any rights-of-way for gas transmission or distribution mains, pipelines or services, or appurtenances thereto or other improvements thereon, and to any real estate used or to be used primarily for the manufacture, storage, transmission or distribution of gas, including real estate held for right-of-way purposes, provided that in the Opinion of Counsel, the Company has power under eminent domain, or similar statutes, to remove such irregularities or deficiencies, or, in the case of

18

any such right-of-way, provided that in the Opinion of Counsel, the Company shall have obtained from the apparent owner of the lands or estates therein covered by any such right-of-way, a sufficient right, by the terms of the instrument granting such right-of-way, to the use thereof for the construction, operation or maintenance of the mains, pipelines, services, appurtenances or improvements for which the same are used or are to be used;

(xiii)

rights reserved to, or vested in, any municipality or governmental or other public authority to control or regulate any property of the Company, or to use such property in any manner, which rights to not materially impair the use of such property, for the purposes for which it is held by the Company;

(xiv)

any obligations or duties, affecting the property of the Company, to any municipality or governmental or other public authority with respect to any franchise, grant, license or permit; and

(xv)

any valid right under any statutory or common law to purchase, or designate a purchaser of or order the sale of, any property of the Company upon payment of cash or reasonable compensation therefor or to terminate any franchise, license or other rights of the Company.

(B)

at any time on and after the Second Effective Date, the term “Permitted Liens” shall, with respect to the Mortgaged Property, mean any of the following; provided, however, that the definition of Permitted Liens set forth in this clause (B) shall be of no force or effect until the Second Effective Date, but shall automatically become and be in full force and effect on and after the Second Effective Date:

(i)

Liens existing as of the Second Effective Date;

(ii)

as to property acquired by the Company after the Second Effective Date, Liens existing or placed thereon at the time of the acquisition thereof (including, but not limited to, any Prior Lien);

(iii)

Liens for taxes, assessments and other governmental charges or requirements which are not delinquent or which are being contested in good faith by appropriate proceedings;

(iv)

mechanics’, workmen’s, repairmen’s, materialmen’s, warehousemen’s, and carriers’ Liens, other Liens incident to construction, Liens or privileges of any employees of the Company for salary or wages earned, but not yet payable, and other Liens, including without limitation Liens for worker’s compensation awards, arising in the ordinary course of business for charges or requirements which are not delinquent or which are being contested in good faith and by appropriate proceedings;

(v)

Liens in respect of attachments, judgments or awards arising out of judicial or administrative proceedings (i) in an amount not exceeding the greater of (A)

19

$10,000,000 and (B) 3% of the aggregate principal amount of all Securities and Secured Debt then Outstanding or (ii) with respect to which the Company shall (X) in good faith be prosecuting an appeal or other proceeding for review and with respect to which the Company shall have secured a stay of execution pending such appeal or other proceeding or (Y) have the right to prosecute an appeal or other proceeding for review;

(vi)

easements, leases, reservations or other rights of others in, on, over and/or across, and laws, regulations and restrictions affecting, and defects, irregularities, exceptions and limitations in title to, the Mortgaged Property or any part thereof; provided, however, that such easements, leases, reservations, rights, laws, regulations, restrictions, defects, irregularities, exceptions and limitations do not in the aggregate materially impair the use by the Company of the Mortgaged Property considered as a whole for the purposes for which it is held by the Company;

(vii)

defects, irregularities, exceptions and limitations in title to real property subject to rights-of-way in favor of the Company or otherwise or used or to be used by the Company primarily for right-of-way purposes or real property held under lease, easement, license or similar right; provided, however, that (i) the Company shall have obtained from the apparent owner or owners of such real property a sufficient right, by the terms of the instrument granting such right-of-way, lease, easement, license or similar right, to the use thereof for the purposes for which the Company acquired the same; or (ii) the Company has power under eminent domain or similar statutes to remove such defects, irregularities, exceptions or limitations; or (iii) such defects, irregularities, exceptions and limitations may be otherwise remedied without undue effort or expense; and defects, irregularities, exceptions and limitations in title to reclaimed lands, flood lands, flooding rights and/or water rights;

(viii)

Liens securing indebtedness or other obligations neither created, assumed nor guaranteed by the Company nor on account of which it customarily pays interest upon real property or rights in or relating to real property acquired by the Company for the purpose of the transmission or distribution of electric energy, gas or water, for the purpose of telephonic, telegraphic, radio, wireless or other electronic communication or otherwise for the purpose of obtaining rights-of-way or for any other purposes;

(ix)

leases existing as of the Second Effective Date affecting properties owned by the Company at said date and renewals and extensions thereof; and leases affecting such properties entered into after such date or affecting properties acquired by the Company after such date which, in either case, (i) have respective terms of not more than 10 years (including extensions or renewals at the option of the tenant) or (ii) do not materially impair the use by the Company of such properties for the respective purposes for which they are held by the Company;

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(x)

Liens vested in lessors, licensors, franchisors or permitters for rent or other amounts to become due or for other obligations or acts to be performed, the payment of which rent or the performance of which other obligations or acts is required under leases, subleases, licenses, franchises or permits, so long as the payment of such rent or other amounts or the performance of such other obligations or acts is not delinquent or is being contested in good faith and by appropriate proceedings;

(xi)

controls, restrictions, obligations, duties and/or other burdens imposed by federal, state, municipal or other law, or by rules, regulations or orders of Governmental Authorities, upon the Mortgaged Property or any part thereof or the operation or use thereof or upon the Company with respect to the Mortgaged Property or any part thereof or the operation or use thereof or with respect to any franchise, grant, license, permit or public purpose requirement, or any rights reserved to or otherwise vested in Governmental Authorities to impose any such controls, restrictions, obligations, duties and/or other burdens;

(xii)

rights which Governmental Authorities may have by virtue of franchises, grants, licenses, permits or contracts, or by virtue of law, to take, condemn, appropriate, occupy, purchase, recapture or designate a purchaser of or order the sale of the Mortgaged Property or any part thereof, to terminate franchises, grants, licenses, permits, contracts or other rights or to regulate the property and business of the Company; and any and all obligations of the Company correlative to any such rights;

(xiii)

Liens required by law or governmental regulations (i) as a condition to the transaction of any business or the exercise of any privilege or license, (ii) to enable the Company to maintain self-insurance or to participate in any funds established to cover any insurance risks, (iii) in connection with workmen’s compensation, unemployment insurance, social security, any pension or welfare benefit plan or (iv) to share in the privileges or benefits required for companies participating in one or more of the arrangements described in clauses (ii) and (iii) above;

(xiv)

Liens on the Mortgaged Property or any part thereof which are granted by the Company to secure duties or public or statutory obligations or to secure, or serve in lieu of, surety, stay or appeal bonds;

(xv)

rights reserved to or vested in others to take or receive any part of any coal, ore, gas, oil and other minerals, any timber and/or any electric capacity or energy, gas, water, steam and any other products, developed, produced, manufactured, generated, purchased or otherwise acquired by the Company or by others on property of the Company;

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(xvi)

(a) rights and interests of Persons other than the Company arising out of contracts, agreements and other instruments to which the Company is a party and which relate to the common ownership or joint use of property; and (b) all Liens on the interests of Persons other than the Company in property owned in common by such Persons and the Company;

(xvii)

any restrictions on assignment and/or requirements of any assignee to qualify as a permitted assignee and/or public utility or public service corporation;

(xviii)

Liens, if any, which may be deemed to exist with respect to property leased by the Company pursuant to leases which are treated under generally accepted accounting principles as capital leases;

(ixx)

any Liens which have been bonded for the full amount in dispute or for the payment of which other adequate security arrangements have been made;

(xx)

rights and interests granted pursuant to Section 1602(c);

(xxi)

Prepaid Liens;

(xxii)

any Liens, claims, encumbrances, rights, or interests of Persons claiming such rights, interests, etc. as descendants of American Indians or as Indian Tribes, whether pursuant to the Non-Intercourse Act of 1834 (25 U.S.C. § 177) or otherwise; and  

(xxiii)

any Lien of the Trustee granted pursuant to Section 1007.

“PERSON” means any individual, corporation, joint venture, limited liability company, trust or unincorporated organization or any Governmental Authority.

“PLACE OF PAYMENT”, when used with respect to the Securities of any series, or Tranche thereof, means the place or places, specified as contemplated by Section 301, at which, subject to Section 702, principal of and premium, if any, and interest, if any, on the Securities of such series or Tranche are payable.

“PREDECESSOR SECURITY” of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.

“PREPAID LIENS” means any Lien securing indebtedness for the payment of which money in the necessary amount shall have been irrevocably deposited in trust with the trustee or other holder of such Lien; provided, however, that if such indebtedness is to be redeemed or otherwise prepaid prior to the stated maturity thereof, any notice requisite to such redemption or prepayment shall have been given in accordance with the mortgage

22

or other instrument creating such Lien or irrevocable instructions to give such notice shall have been given to such trustee or other holder.  

“PRIOR LIEN” means any Lien securing Secured Debt.

“PROPERTY ADDITIONS” has the meaning specified in Section 102.

“PURCHASE MONEY LIEN” means, with respect to any property being acquired or disposed of by the Company or being released from the Lien of this Mortgage, a Lien on such property which

(a)

is taken or retained by the transferor of such property to secure all or part of the purchase price thereof;

(b)

is granted to one or more Persons other than the transferor which, by making advances or incurring an obligation, give value to enable the grantor of such Lien to acquire rights in or the use of such property;

(c)

is granted to any other Person in connection with the release of such property from the Lien of this Mortgage on the basis of the deposit with the Trustee or the trustee or other holder of a Lien prior to the Lien of this Mortgage of obligations secured by such Lien on such property (as well as any other property subject thereto);

(d)

is held by a trustee or agent for the benefit of one or more Persons described in clause (a), (b) and/or (c) above, provided that such Lien may be held, in addition, for the benefit of one or more other Persons which shall have theretofore given, or may thereafter give, value to or for the benefit or account of the grantor of such Lien for one or more other purposes; or

(e)

otherwise constitutes a purchase money mortgage or a purchase money security interest under applicable law; and, without limiting the generality of the foregoing, for purposes of this Mortgage, the term Purchase Money Lien shall be deemed to include any Lien described above whether or not such Lien (x) shall permit the issuance or other incurrence of additional indebtedness secured by such Lien on such property, (y) shall permit the subjection to such Lien of additional property and the issuance or other incurrence of additional indebtedness on the basis thereof and/or (z) shall have been granted prior to the acquisition, disposition or release of such property, shall attach to or otherwise cover property other than the property being acquired, disposed of or released and/or shall secure obligations issued prior and/or subsequent to the issuance of the obligations delivered in connection with such acquisition, disposition or rele ase.

 “REDEMPTION DATE”, when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Mortgage.

“REDEMPTION PRICE”, when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Mortgage, exclusive of accrued and unpaid interest.

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“REGULAR RECORD DATE” for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301.

“REQUIRED CURRENCY” has the meaning specified in Section 311.

“RESPONSIBLE OFFICER”, when used with respect to the Trustee, means any officer within the corporate trust administration group of the Trustee (or any successor group of the Trustee) with direct responsibility for the administration of this Mortgage and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.

“SALE AND LEASE BACK TRANSACTION” means any arrangement with any Person providing for the leasing to the Company of any Mortgaged Property (except for leases for a term, including any renewal thereof, of not more than forty-eight (48) months), which Mortgaged Property has been or is to be sold or transferred by the Company to such Person.  

“SECOND EFFECTIVE DATE” means the earliest date on which the Holders of all Securities then Outstanding shall have consented (or shall be deemed to have consented) to the amendment of this Mortgage substantially in the form that the Mortgage shall have become effective on the First Effective Date with such changes thereafter as are permitted by the terms hereof; provided, however, that the Holders of all Securities issued after the First Effective Date shall automatically be deemed to have so consented.

“SECURED DEBT” means Debt, other than Securities, created, issued, incurred or assumed by the Company which is secured by a Lien, other than a Permitted Lien (except for clause (B)(ii) of the definition thereof), upon any Mortgaged Property of the Company prior to or on a parity with the Lien of this Mortgage.  

“SECURITIES” means any securities authenticated and delivered under this Mortgage.

“SECURITIES ACT” means the Securities Act of 1933, as amended.

“SECURITY REGISTER” AND “SECURITY REGISTRAR” have the respective meanings specified in Section 305.

“SPECIAL RECORD DATE” for the payment of any Defaulted Interest on the Securities of any series means a date fixed by the Trustee pursuant to Section 307.

“STATED INTEREST RATE” means a rate (whether fixed or variable) at which an obligation by its terms is stated to bear simple interest.  Any calculation or other determination to be made under this Mortgage by reference to the Stated Interest Rate on a Security shall be made without regard to the effective interest cost to the Company of such Security and without regard to the Stated Interest Rate on, or the effective cost to the

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Company of, any other indebtedness the Company’s obligations in respect of which are evidenced or secured in whole or in part by such Security.

“STATED MATURITY”, when used with respect to any Security or any obligation or any installment of principal thereof or interest thereon, means the date on which the principal of such obligation or such installment of principal or interest is stated to be due and payable (without regard to any provisions for redemption, prepayment, acceleration, purchase or extension).

“SUCCESSOR COMPANY” has the meaning set forth in Section 1201.

“SUPPLEMENTAL MORTGAGE”, “SUPPLEMENTAL INDENTURE” or “MORTGAGE SUPPLEMENTAL HERETO” means an instrument supplementing or amending this Mortgage executed and delivered pursuant to Article Thirteen.  

“TRANCHE” means a group of Securities which (a) are of the same series and (b) have identical terms except as to principal amount, date of issuance, interest rate, payment terms and/or maturity date.

“TRUSTEE” means the Person named as the “Trustee” in the first paragraph of this Mortgage until a successor Trustee shall have been appointed by the Company pursuant to Section 1010 or otherwise have become such with respect to one or more series of Securities pursuant to the applicable provisions of this Mortgage, and thereafter “Trustee” shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, “Trustee” as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series.

“TRUST INDENTURE ACT” means, as of any time, the Trust Indenture Act of 1939 as in effect at such time.

“UNITED STATES” means the United States of America, its territories, its possessions and other areas subject to its jurisdiction.

SECTION 102.

PROPERTY ADDITIONS; COST.

(a)

“PROPERTY ADDITIONS” means, as of any particular time, any item, unit or element of property which at such time is owned by the Company and is Mortgaged Property.

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(b)

When the aggregate amount of any Property Additions are calculated for any purpose under the Mortgage, there shall be deducted from the Cost or Fair Value to the Company thereof, as the case may be (as of the date so calculated), an amount equal to all related reserves (estimated, if necessary, as to particular property) for depreciation, depletion, obsolescence or amortization recorded on the books of the Company as of the date so calculated in respect of such Property Additions which have not theretofore been deducted from the Cost or Fair Value of Property Additions theretofore so calculated.  

(c)

Except as otherwise provided in Section 1603, the term “COST” with respect to Property Additions shall mean the sum of (i) any cash delivered in payment therefor or for the acquisition thereof, (ii) an amount equivalent to the fair market value in cash (as of the date of delivery) of any securities or other property delivered in payment therefor or for the acquisition thereof, (iii) the principal amount of any obligations secured by a Prior Lien upon such Property Additions outstanding at the time of the acquisition thereof, (iv) the principal amount of any other obligations incurred or assumed in connection with the payment for such Property Additions or for the acquisition thereof and (v) any other amounts which, in accordance with generally accepted accounting principles, are properly charged or chargeable to the plant or other property accounts of the Company with respect to such Property Additions as part of the co st of construction or acquisition thereof, including, but not limited to, any allowance for funds used during construction or any similar or analogous amount; provided, however, that, notwithstanding any other provision of this Mortgage,

(i)

with respect to Property Additions owned by a successor corporation immediately prior to the time it shall have become such by consolidation or merger or acquired by a successor corporation in or as a result of a consolidation or merger (excluding, in any case, Property Additions owned by the Company immediately prior to such time), Cost shall mean the amount or amounts at which such Property Additions are recorded in the plant or other property accounts of such successor corporation, or the predecessor corporation from which such Property Additions are acquired, as the case may be, immediately prior to such consolidation or merger;

(ii)

with respect to Property Additions which shall have been acquired (otherwise than by construction) by the Company without any consideration consisting of cash, securities or other property or the incurring or assumption of indebtedness, no determination of Cost shall be required, and, wherever in this Mortgage provision is made for Cost or Fair Value, Cost with respect to such Property Additions shall mean an amount equal to the Fair Value to the Company thereof or, if greater, the aggregate amount reflected in the Company’s books of account with respect thereto upon the acquisition thereof; and

(iii)

in no event shall the Cost of Property Additions be required to reflect any adjustment to the amount or amounts at which such Property Additions are recorded in plant or other property accounts due to the non-recoverability of investment or otherwise.

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If any Property Additions are shown by the Experts’ Certificate provided for in Section 401(b)(ii) to include property which has been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company, the Cost thereof need not be reduced by any amount in respect of any goodwill, going concern value, franchises, contracts, operating agreements and other rights and/or intangible property simultaneously acquired for which no separate or distinct consideration shall have been paid or apportioned, and in such case the term Property Additions as defined herein may include such goodwill, going concern value rights and intangible property.

SECTION 103.

COMPLIANCE CERTIFICATES AND OPINIONS.

Except as otherwise expressly provided in this Mortgage, upon any application or request by the Company to the Trustee to take any action under any provision of this Mortgage, the Company shall furnish to the Trustee an Officers’ Certificate stating that in the opinion of the Authorized Officers executing such Officers’ Certificate all conditions precedent, if any, provided for in this Mortgage relating to the proposed action (including any covenants compliance with which constitutes a condition precedent) have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Mortgage relating to such particular application or request, no additional certificate or opinion need be furnished.

Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Mortgage shall include:

(a)

a statement that each Person signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;

(b)

a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(c)

a statement that, in the opinion of each such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d)

a statement as to whether, in the opinion of each such Person, such condition or covenant has been complied with.

SECTION 104.

FORM OF DOCUMENTS DELIVERED TO TRUSTEE.

(a)

Any Officers’ Certificate may be based (without further examination or investigation), insofar as it relates to or is dependent upon legal matters, upon an opinion of, or representations by, counsel, and, insofar as it relates to or is dependent upon matters which are subject to verification by Accountants, upon a certificate or opinion of,

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or representations by, an Accountant, and insofar as it relates to or is dependent upon matters which are required in this Mortgage to be covered by a certificate or opinion of, or representations by, an Expert, upon the certificate or opinion of, or representations by, an Expert, unless, in any case, either such officer has actual knowledge that the certificate or opinion or representations with respect to the matters upon which such Officers’ Certificate may be based as aforesaid are erroneous.

Any Experts’ Certificate may be based (without further examination or investigation), insofar as it relates to or is dependent upon legal matters, upon an opinion of, or representations by, counsel, and insofar as it relates to or is dependent upon factual matters, information with respect to which is in the possession of the Company and which are not subject to verification by Experts, upon a certificate or opinion of, or representations by, an officer or officers of the Company, unless such expert has actual knowledge that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion may be based as aforesaid are erroneous.

Any certificate of an Accountant may be based (without further examination or investigation), insofar as it relates to or is dependent upon legal matters, upon an opinion of, or representations by, counsel, and in so far as it relates to or is dependent upon factual matters, information with respect to which is in the possession of the Company and which are not subject to verification by Accountants, upon a certificate of, or representations by, an officer or officers of the Company, unless such Accountant has actual knowledge that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion may be based as aforesaid are erroneous.

Any Opinion of Counsel may be based (without further examination or investigation), insofar as it relates to or is dependent upon factual matters, information with respect to which is in the possession of the Company, upon a certificate of, or representations by, an officer or officers of the Company, and, insofar as it relates to or is dependent upon matters which are subject to verification by Accountants upon a certificate or opinion of, or representations by, an Accountant, and, insofar as it relates to or is dependent upon matters required in this Mortgage to be covered by a certificate or opinion of, or representations by, an Expert, upon the certificate or opinion of, or representations by, an Expert, unless such counsel has actual knowledge that the certificate or opinion or representations with respect to the matters upon which his opinion may be based as aforesaid are erroneous.  In addition, any Opinion of Counsel may be based (without further examination or investigation), insofar as it relates to or is dependent upon matters covered in an Opinion of Counsel rendered by other counsel, upon such other Opinion of Counsel, unless such counsel has actual knowledge that the Opinion of Counsel rendered by such other counsel with respect to the matters upon which his Opinion of Counsel may be based as aforesaid are erroneous.  Further, any Opinion of Counsel with respect to the status of title to or the sufficiency of descriptions of property, and/or the existence of Liens thereon, and/or the recording or filing of documents, and/or any similar matters, may be based (without further examination or investigation) upon (i) title insurance policies or commitments and reports, abstracts of title, lien search certificates and other similar documents or (ii) certificates of, or representations by, officers, employees, agents and/or other representatives of the Company or (iii) any combination of the documents referred to

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in (i) and (ii), unless, in any case, such counsel has actual knowledge that the document or documents with respect to the matters upon which his opinion may be based as aforesaid are erroneous.  If, in order to render any Opinion of Counsel provided for herein, the signer thereof shall deem it necessary that additional facts or matters be stated in any Officers’ Certificate, certificate of an Accountant or Experts’ Certificate provided for herein, then such certificate may state all such additional facts or matters as the signer of such Opinion of Counsel may request.

(b)

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.  Where (i) any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Mortgage, or (ii) two or more Persons are each required to make, give or execute any such application, request, consent, certificate, statement, opinion or other instrument, any such applications, requests, consents, certificates, statement s, opinions or other instruments may, but need not, be consolidated and form one instrument.

(c)

Whenever, subsequent to the receipt by the Trustee of any Board Resolution, Officers’ Certificate, Experts’ Certificate, Opinion of Counsel or other document or instrument, a clerical, typographical or other inadvertent or unintentional error or omission shall be discovered therein, a new document or instrument may be substituted therefor in corrected form with the same force and effect as if originally filed in the corrected form and, irrespective of the date or dates of the actual execution and/or delivery thereof, such substitute document or instrument shall be deemed to have been executed and/or delivered as of the date or dates required with respect to the document or instrument for which it is substituted.  Anything in this Mortgage to the contrary notwithstanding, if any such corrective document or instrument indicates that action has been taken by or at the request of the Company which could not have been t aken had the original document or instrument not contained such error or omission, the action so taken shall not be invalidated or otherwise rendered ineffective but shall be and remain in full force and effect, except to the extent that such action was a result of willful misconduct or bad faith.  Without limiting the generality of the foregoing, any Securities issued under the authority of such defective document or instrument shall nevertheless be the valid obligations of the Company entitled to the benefits of this Mortgage equally and ratably with all other Outstanding Securities, except as aforesaid.

SECTION 105.

ACTS OF HOLDERS.

(a)

Any request, demand, authorization, direction, notice, consent, election, waiver or other action provided by this Mortgage to be made, given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing or, alternatively, may be embodied in and evidenced by the record of Holders voting in favor

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thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders duly called and held in accordance with the provisions of Article Fourteen, or a combination of such instruments and any such record.  Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company.  Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments and so voting at any such meeting.  Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Mortgage and (subject to Section 1001) conclusive in favor of t he Trustee and the Company, if made in the manner provided in this Section.  The record of any meeting of Holders shall be proved in the manner provided in Section 1406.

(b)

The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof or may be proved in any other manner which the Trustee and the Company deem sufficient.  Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority.

(c)

The ownership, principal amount (except as otherwise contemplated in clause (y) of the first proviso to the definition of Outstanding) and serial numbers of Securities held by any Person, and the date of holding the same, shall be proved by the Security Register.

(d)

Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of a Holder shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.

(e)

Until such time as written instruments shall have been delivered to the Trustee with respect to the requisite percentage of principal amount of Securities for the action contemplated by such instruments, any such instrument executed and delivered by or on behalf of a Holder may be revoked with respect to any or all of such Securities by written notice by such Holder or any subsequent Holder, proven in the manner in which such instrument was proven.

(f)

Securities of any series, or any Tranche thereof, authenticated and delivered after any Act of Holders may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any action taken by such Act of Holders.  If the Company shall so determine, new Securities of any series, or any Tranche thereof, so modified as to conform, in the opinion of the Trustee and the Company, to such action may

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be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series or Tranche.

(g)

If the Company shall solicit from Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so.  If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on the record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of the Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be co mputed as of the record date.

SECTION 106.

NOTICES, ETC. TO TRUSTEE OR COMPANY.

Except as otherwise provided herein, any request, demand, authorization, direction, notice, consent, election, waiver or Act of Holders or other document provided or permitted by this Mortgage to be made upon, given or furnished to, or filed with, the Trustee by any Holder or by the Company, or the Company by the Trustee or by any Holder, shall be sufficient for every purpose hereunder (unless otherwise expressly provided herein) if in writing and delivered personally to an officer or other responsible employee of the addressee, or transmitted by facsimile transmission or other direct written electronic means to such telephone number or other electronic communications address set forth for such party below or such other address as the parties hereto shall from time to time designate, or delivered by registered or certified mail or reputable overnight courier, charges prepaid, to the applicable address set forth for su ch party below or to such other address as either party hereto may from time to time designate:

If to the Trustee, to:

The Bank of New York Mellon Trust Company, N.A.

Attention:  

Telephone:

Telecopy:

If to the Company, to:

Yankee Gas Services Company

107 Selden Street

Berlin, Connecticut  06037

Attention:

 [_________]

Telephone:

(860) [_________]

Telecopy:

(860) [_________]

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Any communication contemplated herein shall be deemed to have been made, given, furnished and filed if personally delivered, on the date of delivery, if transmitted by facsimile transmission or other direct written electronic means, on the date of transmission if transmitted during normal business hours and otherwise on the next Business Day, and if transmitted by registered or certified mail or reputable overnight courier, on the date of receipt.

SECTION 107.

NOTICE TO HOLDERS OF SECURITIES; WAIVER.

Except as otherwise expressly provided herein, where this Mortgage provides for notice to Holders of any event, such notice shall be sufficiently given, and shall be deemed given, to Holders if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, if any, prescribed for the giving of such Notice.

In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice to Holders by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.  In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to Holders.

Any notice required by this Mortgage may be waived in writing by the Person entitled to receive such notice, either before or after the event otherwise to be specified therein, and such waiver shall be the equivalent of such notice.  Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

SECTION 108.

CONFLICT WITH TRUST INDENTURE ACT.

If any provision of this Mortgage limits, qualifies or conflicts with another provision hereof which is required or deemed to be included in this Mortgage by, or is otherwise governed by, any provision of the Trust Indenture Act, such other provision shall control; and if any provision hereof otherwise conflicts with the Trust Indenture Act, the Trust Indenture Act shall control unless otherwise provided as contemplated by Section 301 with respect to any series of Securities.

SECTION 109.

EFFECT OF HEADINGS AND TABLE OF CONTENTS.

The Article and Section headings in this Mortgage and the Table of Contents are for convenience only and shall not affect the construction hereof.

SECTION 110.

SUCCESSORS AND ASSIGNS.

All covenants and agreements in this Mortgage by the Company and Trustee shall bind their respective successors and assigns, whether so expressed or not.

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SECTION 111.

SEPARABILITY CLAUSE.

In case any provision in this Mortgage or the Securities shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 112.

BENEFITS OF MORTGAGE.

Nothing in this Mortgage or the Securities, express or implied, shall give to any Person, other than the parties hereto, their successors hereunder and the Holders of any Outstanding Securities, any benefit or any legal or equitable right, remedy or claim under this Mortgage.

SECTION 113.

GOVERNING LAW.

This Mortgage and the Securities shall be governed by and construed in accordance with the law of the State of Connecticut, except to the extent that the Trust Indenture Act shall be applicable and except to the extent that the laws of any other state where the Company then owns Mortgaged Property shall govern the Mortgage Lien and related provisions of the Mortgage with respect to property in such state; provided however that the rights and obligations of the Trustee shall be governed by the laws of the state in which the Corporate Trust Office is located.  

SECTION 114.

LEGAL HOLIDAYS.

In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Mortgage or of the Securities other than a provision in Securities of any series, or any Tranche thereof, or in the Mortgage supplemental hereto, Board Resolution or Officers’ Certificate which establishes the terms of the Securities of such series or Tranche, which specifically states that such provision shall apply in lieu of this Section) payment of interest or principal and premium, if any, need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date, Redemption Date, or Stated Maturity, and, if such payment is made or duly provided for on such Business Day, no interest sha ll accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to such Business Day.

SECTION 115.

INVESTMENT OF CASH HELD BY TRUSTEE.

Any cash held by the Trustee or any Paying Agent under any provision of this Mortgage shall, except as otherwise provided in Section 1606 or in Article Eight, at the request of the Company evidenced by Company Order, be invested or reinvested in Investment Securities designated by the Company (such Company Order to contain a representation to the effect that the securities designated therein constitute Investment Securities), any interest on such Investment Securities shall be promptly paid over to the Company as received free and clear of any Lien.  Such Investment Securities shall be held

33

subject to the same provisions hereof as the cash used to purchase the same, but upon a like request of the Company shall be sold, in whole or in designated part, and the proceeds of such sale shall be held subject to the same provisions hereof as the cash used to purchase the Investment Securities so sold.  If such sale shall produce a net sum less than the cost of the Investment Securities so sold, the Company shall pay to the Trustee or any such Paying Agent, as the case may be, such amount in cash as, together with the net proceeds from such sale, shall equal the cost of the Investment Securities so sold, and if such sale shall produce a net sum greater than the cost of the Investment Securities so sold, the Trustee or any such Paying Agent, as the case may be, shall promptly pay over to the Company an amount in cash equal to such excess, free and clear of any Lien.  In no event shall the Trustee be liable for any loss incurred in co nnection with the sale of any Investment Security pursuant to this Section.

Notwithstanding the foregoing, if an Event of Default shall have occurred and be continuing, interest on Investment Securities and any gain upon the sale thereof shall be held as part of the Mortgaged Property until such Event of Default shall have been cured or waived, whereupon such interest and gain shall be promptly paid over to the Company free and clear of any Lien.

SECTION 116.

DEFINITIONS AND REFERENCES IN SUPPLEMENTAL INDENTURES.

To the extent that any Supplemental Indenture dated as of a date prior to the First Effective Date refers to sections contained in the Original Indenture or to terms defined in the Original Indenture, any such reference to sections or defined terms shall be deemed to be a reference to the appropriate corresponding section or defined term in this Mortgage.

ARTICLE TWO

SECURITY FORMS

SECTION 201.

FORMS GENERALLY.

The definitive Securities of each series shall be in substantially the form or forms thereof established in the Mortgage supplemental hereto establishing such series or in a Board Resolution establishing such series, or in an Officers’ Certificate pursuant to such a Supplemental Mortgage or Board Resolution, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Mortgage, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution thereof.  If the form or forms of Securities of any series are established in a Board Resolution or in an Officers’ Certificate pursuant to a Supplemental M ortgage or a Board Resolution, such Board Resolution and Officers’ Certificate, if any, shall be delivered to the Trustee at or prior to the delivery of

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the Company Order contemplated by Section 303 for the authentication and delivery of such Securities.

Unless otherwise specified as contemplated by Section 301, the Securities of each series shall be issuable in registered form without coupons.  The definitive Securities shall be produced in such manner as shall be determined by the officers executing such Securities, as evidenced by their execution thereof.

SECTION 202.

FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION.

The Trustee’s certificate of authentication shall be in substantially the form set forth below:

This is one of the Securities of the series designated therein referred to in the within-mentioned Mortgage.

The Bank of New York Mellon Trust Company, N.A.,
as Trustee
By: _____________________________
Authorized Signatory

ARTICLE THREE

THE SECURITIES

SECTION 301.

AMOUNT UNLIMITED; ISSUABLE IN SERIES.

The aggregate principal amount of Securities which may be authenticated and delivered under this Mortgage is unlimited.

The Securities may be issued in one or more series.  Subject to the last paragraph of this Section, prior to the authentication and delivery of Securities of any series there shall be established by specification in a supplemental Mortgage or in a Board Resolution or in an Officers’ Certificate pursuant to a supplemental Mortgage or a Board Resolution:

(a)

the title of the Securities of such series (which shall distinguish the Securities of such series from Securities of all other series);

(b)

any limit upon the aggregate principal amount of the Securities of such series which may be authenticated and delivered under this Mortgage (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of such series pursuant to Section 304, 305, 306, 506 or 1306 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder);

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(c)

the Person or Persons (without specific identification) to whom any interest on Securities of such series, or any Tranche thereof, shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest;

(d)

the date or dates on which the principal of the Securities of such series or any Tranche thereof, is payable or any formulary or other method or other means by which such date or dates shall be determined, by reference to an index or other fact or event ascertainable outside of this Mortgage or otherwise (without regard to any provisions for redemption, prepayment, acceleration, purchase or extension); and the right, if any, to extend the Maturity of the Securities of such series, or any Tranche thereof, and the duration of any such extension;

(e)

the rate or rates at which the Securities of such series, or any Tranche thereof, shall bear interest, if any (including the rate or rates at which overdue principal shall bear interest after Maturity if different from the rate or rates at which such Securities shall bear interest prior to Maturity, and, if applicable, the rate or rates at which overdue premium or interest shall bear interest, if any), or any formulary or other method or other means by which such rate or rates shall be determined by reference to an index or other fact or event ascertainable outside of this Mortgage or otherwise, the date or dates from which such interest shall accrue; the Interest Payment Dates and the Regular Record Dates, if any, for the interest payable on such Securities on any Interest Payment Date; and the basis of computation of interest, if other than as provided in Section 310; and the right, if any, to extend the interest payment period s and the duration of any such extension;

(f)

the place or places at which and/or methods (if other than as provided elsewhere in this Mortgage) by which (i) the principal of and premium, if any, and interest, if any, on Securities of such series, or any Tranche thereof, shall be payable, (ii) registration of transfer of Securities of such series, or any Tranche thereof, may be effected, (iii) exchanges of Securities of such series, or any Tranche thereof, may be effected and (iv) notices and demands to or upon the Company in respect of the Securities of such series, or any Tranche thereof, and this Mortgage may be served; the Security Registrar and any Paying Agent or Agents for such series or Tranche; and, if such is the case, that the principal of such Securities shall be payable without the presentment or surrender thereof;

(g)

the period or periods within which, or the date or dates on which, the price or prices at which and the terms and conditions upon which the Securities of such series, or any Tranche thereof, may be redeemed, in whole or in part, at the option of the Company and any restrictions on such redemptions; including but not limited to a restriction on a partial redemption by the Company of the Securities of any series, or any Tranche thereof, resulting in delisting of such Securities from any national exchange;

(h)

the obligation or obligations, if any, of the Company to redeem or purchase or repay the Securities of such series, or any Tranche thereof, pursuant to any sinking fund or other mandatory redemption provisions or at the option of a Holder thereof and the period or periods within which or the date or dates on which, the price or prices at

36

which and the terms and conditions upon which such Securities shall be redeemed or purchased or repaid, in whole or in part, pursuant to such obligation and applicable exceptions to the requirements of Section 504 in the case of mandatory redemption or redemption or repayment at the option of the Holder;

(i)

the denominations in which Securities of such series, or any Tranche thereof, shall be issuable if other than denominations of $1,000 and any integral multiple thereof;

(j)

if the principal of or premium, if any, or interest, if any, on the Securities of such series, or any Tranche thereof, are to be payable, at the election of the Company or a Holder thereof, in a coin or currency other than that in which the Securities are stated to be payable, the period or periods within which, and the terms and conditions upon which, such election may be made and the manner in which the amount of such coin or currency payable is to be determined;

(k)

the currency or currencies, including composite currencies, in which payment of the principal of and premium, if any, and interest, if any, on the Securities of such series, or any Tranche thereof, shall be payable (if other than Dollars) and the manner in which the equivalent of the principal amount thereof in Dollars is to be determined for any purpose, including for the purpose of determining the principal amount deemed to be Outstanding at any time;

(l)

if the principal of or premium, if any, or interest, if any, on the Securities of such series, or any Tranche thereof, are to be payable, or are to be payable at the election of the Company or a Holder thereof, in securities or other property, the type and amount of such securities or other property, or the formulary or other method or other means by which such amount shall be determined, and the period or periods within which, and the terms and conditions upon which, any such election may be made;

(m)

if the amount payable in respect of principal of or premium, if any, or interest, if any, on the Securities of such series, or any Tranche thereof, may be determined with reference to an index or other fact or event ascertainable outside this Mortgage, the manner in which such amounts shall be determined to the extent not established pursuant to clause (e) of this paragraph;

(n)

if other than the entire principal amount thereof, the portion of the principal amount of Securities of such series, or any Tranche thereof, which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 902;

(o)

any Events of Default, in addition to those specified in Section 901, or any exceptions to those specified in Section 901, with respect to the Securities of such series, and any covenants of the Company for the benefit of the Holders of the Securities of such series, or any Tranche thereof, in addition to those set forth in Article Seven, or any exceptions to those set forth in Article Seven;

37

(p)

the terms, if any, pursuant to which the Securities of such series, or any Tranche thereof, may be converted into or exchanged for shares of capital stock or other securities of the Company or any other Person;

(q)

the obligations or instruments, if any, which shall be considered to be Eligible Obligations in respect of the Securities of such series, or any Tranche thereof, denominated in a currency other than Dollars or in a composite currency, whether Eligible Obligations include Investment Securities with respect to Securities of such series, and any provisions for satisfaction and discharge of Securities of any series, in addition to those set forth in Article Eight, or any exceptions to those set forth in Article Eight;

(r)

if the Securities of such series, or any Tranche thereof, are to be issued in global form, (i) any limitations on the rights of the Holder or Holders of such Securities to transfer or exchange the same or to obtain the registration of transfer thereof, (ii) any limitations on the rights of the Holder or Holders thereof to obtain certificates therefor in definitive form in lieu of global form and (iii) any other matters incidental to such Securities;

(s)

if the Securities of such series, or any Tranche thereof, are to be issuable as bearer securities, any and all matters incidental thereto which are not specifically addressed in a supplemental Mortgage as contemplated by clause (g) of Section 1301;

(t)

to the extent not established pursuant to clause (r) of this paragraph, any limitations on the rights of the Holders of the Securities of such Series, or any Tranche thereof, to transfer or exchange such Securities or to obtain the registration of transfer thereof; and if a service charge will be made for the registration of transfer or exchange of Securities of such series, or any Tranche thereof, the amount or terms thereof;

(u)

any exceptions to Section 115, or variation in the definition of Business Day, with respect to the Securities of such series, or any Tranche thereof; and

(v)

any other terms of the Securities of such series, or any Tranche thereof, that the Company may elect to specify.

With respect to Securities of a series subject to a Periodic Offering, the Mortgage supplemental hereto or the Board Resolution which establishes such series, or the Officers’ Certificate pursuant to such supplemental Mortgage or Board Resolution, as the case may be, may provide general terms or parameters for Securities of such series and provide either that the specific terms of Securities of such series, or any Tranche thereof, shall be specified in a Company Order or that such terms shall be determined by the Company or its agents in accordance with procedures specified in a Company Order as contemplated in clause (b) of Section 303.

Unless otherwise provided with respect to a series of Securities as contemplated in clause (b) of this Section 301, the aggregate principal amount of a series of Securities may

38

be increased and additional Securities of such series may be issued up to the maximum aggregate principal amount authorized with respect to such series as increased.

SECTION 302.

DENOMINATIONS.

Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, or any Tranche thereof, the Securities of each series shall be issuable in denominations of $1,000 and any integral multiple thereof.

SECTION 303.

EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities or any Tranche thereof, the Securities shall be executed on behalf of the Company by an Authorized Officer, and may have the corporate seal of the Company affixed thereto or reproduced thereon attested by any other Authorized Officer or by the Secretary or an Assistant Secretary of the Company.  The signature of any or all of these officers on the Securities may be manual or facsimile.

Securities bearing the manual or facsimile signatures of individuals who were at the time of execution Authorized Officers or the Secretary or an Assistant Secretary of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.

The Trustee shall authenticate and deliver Securities of a series for original issue, at one time or from time to time in accordance with the Company Order referred to below, upon receipt by the Trustee of:

(a)

the instrument or instruments establishing the form or forms and terms of the Securities of such series, as provided in Sections 201 and 301;

(b)

a Company Order requesting the authentication and delivery of such Securities and, to the extent that the terms of such Securities shall not have been established in an Mortgage supplemental hereto or in a Board Resolution, or in an Officers’ Certificate pursuant to a supplemental Mortgage or Board Resolution, all as contemplated by Section 301, either (i) establishing such terms or (ii) in the case of Securities of a series subject to a Periodic Offering, specifying procedures, acceptable to the Trustee, by which such terms are to be established (which procedures may provide, to the extent acceptable to the Trustee, for authentication and delivery pursuant to oral or electronic instructions from the Company or any agent or agents thereof, which oral instructions are to be promptly confirmed electronically or in writing), in either case in accordance with the instrument or instruments establishing the terms of the Securities of such series delivered pursuant to clause (a) above;

(c)

any opinions, certificates, documents and instruments required by Article Four;

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(d)

Securities of such series, each executed on behalf of the Company by an Authorized Officer of the Company;

(e)

an Officers’ Certificate (i) which shall comply with the requirements of Section 104 of this Mortgage and (ii) which states that no Event of Default under this Mortgage has occurred or is occurring;

(f)

an Opinion of Counsel which shall comply with the requirements of Section 104 of this Mortgage and that states that:

(i)

the form or forms of such Securities have been duly authorized by the Company and have been established in conformity with the provisions of this Mortgage;

(ii)

the terms of such Securities have been duly authorized by the Company and have been established in conformity with the provisions of this Mortgage; and

(iii)

when such Securities shall have been authenticated and delivered by the Trustee and issued and delivered by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, such Securities will have been duly issued under this Mortgage, and will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by this Mortgage, and enforceable in accordance with their terms, subject, as to enforcement, to state environmental “super lien” laws and laws relating to or affecting generally the enforcement of mortgagees’ and other creditors’ rights, including, without limitation, bankruptcy, insolvency, reorganization, receivership, moratorium and other laws affecting the rights and remedies of creditors and mortgagees generally, general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and an implied covenant of good faith, fair dealing and reasonableness.

provided, however, that, with respect to Securities of a series subject to a Periodic Offering, the Trustee shall be entitled to receive such Opinion of Counsel only once at or prior to the time of the first authentication and delivery of Securities of such series and that in lieu of the opinions described in clauses (ii) and (iii) above such Opinion of Counsel may, alternatively, state, respectively,

(x)

that, when the terms of such Securities shall have been established pursuant to a Company Order or Orders, or pursuant to such procedures as may be specified from time to time by a Company Order or Orders, all as contemplated by and in accordance with the instrument or instruments delivered pursuant to clause (a) above, such terms will have been duly authorized by the Company and will have been established in conformity with the provisions of this Mortgage; and

(y)

that such Securities, when (1) executed by the Company, (2) authenticated and delivered by the Trustee in accordance with this Mortgage, (3) issued and delivered by the Company and (4) paid for, all as contemplated by and in accordance with the aforesaid

40

Company Order or Orders, as the case may be, will have been duly issued under this Mortgage and will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by the Mortgage, and enforceable in accordance with their terms, subject, as to enforcement, to laws relating to or affecting generally the enforcement of mortgagees’ and other creditors’ rights, including, without limitation, bankruptcy, insolvency, reorganization, receivership, moratorium and other laws affecting the rights and remedies of creditors and mortgagees generally, general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and an implied covenant of good faith, fair dealing and reasonableness.

With respect to Securities of a series subject to a Periodic Offering, the Trustee may conclusively rely, as to the authorization by the Company of any of such Securities, the forms and terms thereof and the legality, validity, binding effect and enforceability thereof, and compliance of the authentication and delivery thereof with the terms and conditions of this Mortgage, upon the Opinion of Counsel and other documents delivered pursuant to Sections 201 and 301 and this Section, as applicable, at or prior to the time of the first authentication of Securities of such series, unless and until such opinion or other documents have been superseded or revoked or expire by their terms.  In connection with the authentication and delivery of Securities of a series, pursuant to a Periodic Offering, the Trustee shall be entitled to assume that the Company’s instructions to authenticate and deliver such Securities do not violate any applicable law or any applicable rule, regulation or order of any Governmental Authority having jurisdiction over the Company.

If the forms or terms of the Securities of any series have been established by or pursuant to a Board Resolution or an Officers’ Certificate as permitted by Sections 201 or 301, the Trustee shall not be required to authenticate such Securities if the issuance of such Securities pursuant to this Mortgage will materially and adversely affect the Trustee’s own rights, duties or immunities under the Securities and this Mortgage or otherwise in a manner which is not reasonably acceptable to the Trustee.

Except as otherwise specified as contemplated by Section 301 with respect to any series of Securities, or any Tranche thereof, each Security shall be dated the date of its authentication.

Except as otherwise specified as contemplated by Section 301 with respect to any series of Securities, or any Tranche thereof, no Security shall be entitled to any benefit under this Mortgage or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee or its agent by manual signature of an authorized officer thereof, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Mortgage.  Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder to the Company, or any Person acting on its behalf, but shall never have been issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellat ion as provided in Section 309 together with a written statement (which need not comply with Section 104 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued

41

and sold by the Company, for all purposes of this Mortgage such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits hereof.

SECTION 304.

TEMPORARY SECURITIES.

Pending the preparation of definitive Securities of any series, or any Tranche thereof, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, with such appropriate insertions, omissions, substitutions and other variations as any officer executing such Securities may determine, as evidenced by such officer’s execution of such Securities; provided, however, that temporary Securities need not recite specific redemption, sinking fund, conversion or exchange provisions.

Unless otherwise specified as contemplated by Section 301 with respect to the Securities of any series, or any Tranche thereof, after the preparation of definitive Securities of such series or Tranche, the temporary Securities of such series or Tranche shall be exchangeable, without charge to the Holder thereof, for definitive Securities of such series or Tranche upon surrender of such temporary Securities at the office or agency of the Company maintained pursuant to Section 702 in a Place of Payment for such Securities.  Upon such surrender of temporary Securities for such exchange, the Company shall, except as aforesaid, execute and the Trustee shall authenticate and deliver in exchange therefor definitive Securities of the same series and Tranche of authorized denominations and of like tenor and aggregate principal amount.

Until exchanged in full as hereinabove provided, temporary Securities shall in all respects be entitled to the same benefits under this Mortgage as definitive Securities of the same series and Tranche and of like tenor authenticated and delivered hereunder.

SECTION 305.

REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

The Company shall cause to be kept in each office designated pursuant to Section 702, with respect to the Securities of each series, a register (all registers kept in accordance with this Section being collectively referred to as the “Security Register”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities of such series, or any Tranche thereof, and the registration of transfer thereof.  The Company shall designate one Person to maintain the Security Register for the Securities of each series on a consolidated basis, and such Person is referred to herein, with respect to such series, as the “Security Registrar.”  Anything herein to the contrary notwithstanding, the Company may designate one or more of its offices as an office in which a register with respect to the Securities of one or more series shall be maint ained, and the Company may designate itself the Security Registrar with respect to one or more of such series.  The Security Register shall be open for inspection by the Trustee and the Company at all reasonable times.

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Except as otherwise specified as contemplated by Section 301 with respect to the Securities of any series, or any Tranche thereof, upon surrender for registration of transfer of any Security of such series or Tranche at the office or agency of the Company maintained pursuant to Section 702 in a Place of Payment for such series or Tranche, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series and Tranche, of authorized denominations and of like tenor and aggregate principal amount.

Except as otherwise specified as contemplated by Section 301 with respect to the Securities of any series, or any Tranche thereof, any Security of such series or Tranche may be exchanged at the option of the Holder for one or more new Securities of the same series and Tranche, of authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at any such office or agency.  Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities, which the Holder making the exchange is entitled to receive.

All Securities delivered upon any registration of transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same obligation, and entitled to the same benefits under this Mortgage, as the Securities surrendered upon such registration of transfer or exchange.

Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company, the Trustee or the Security Registrar) be duly endorsed or shall be accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee or the Security Registrar, as the case may be, duly executed by the Holder thereof or his attorney duly authorized in writing.

Unless otherwise specified as contemplated by Section 301, with respect to Securities of any series, or any Tranche thereof, no service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 506 or 1306 not involving any transfer.

The Company shall not be required to execute or to provide for the registration of transfer of or the exchange of (a) Securities of any series, or any Tranche thereof, during a period of 15 days immediately preceding the date notice is to be given identifying the serial numbers of the Securities of such series or Tranche called for redemption or (b) any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.

SECTION 306.

MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.

If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the

43

same series and Tranche, and of like tenor and principal amount, bearing a number not contemporaneously outstanding.

If there shall be delivered to the Company and the Trustee (a) evidence to their satisfaction of the ownership of and the destruction, loss or theft of any Security and (b) such security or indemnity as may be reasonably required by them to save each of them and any agent of any of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and Tranche, and of like tenor and principal amount, bearing a number not contemporaneously outstanding.

Notwithstanding the foregoing, in case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security.

Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Trustee) in connection therewith.

Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone other than the Holder of such new Security, and any such new Security shall be entitled to all the benefits of this Mortgage equally and proportionately with any and all other Securities of such series duly issued hereunder.

The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

SECTION 307.

PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.

Unless otherwise specified as contemplated by Section 301 with respect to the Securities of any series, or any Tranche thereof, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.

Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the Holder on the related Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election, as provided in clause (a) or (b) below:

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(a)

The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a date (a “Special Record Date”) for the payment of such Defaulted Interest, which shall be fixed in the following manner.  The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause p rovided.  Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment.  The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company shall promptly cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at the address of such Holder as it appears in the Security Register, not less than 10 days prior to such Special Record Date.  Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Pred ecessor Securities) are registered at the close of business on such Special Record Date.  No interest, other than said Defaulted Interest, shall be payable to such holders with respect to any such amounts so deposited by the Company with the Trustee.  

(b)

The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Mortgage upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.

SECTION 308.

PERSONS DEEMED OWNERS.

Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and premium, if any, and (subject to Sections 305 and 307) interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and none of the Company, the Trustee or any agent of the Company or the Trustee shall be affected by notice to the contrary.

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SECTION 309.

CANCELLATION.

All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Security Registrar, be delivered to the Security Registrar and, if not theretofore canceled, shall be promptly canceled by the Security Registrar.  The Company may at any time deliver to the Security Registrar for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever or which the Company shall not have issued and sold, and all Securities so delivered shall be promptly canceled by the Security Registrar.  No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Mortgage.  All canceled Securities held by the Security Registrar shall be disp osed of in accordance with the customary practices of the Security Registrar at the time in effect, and the Security Registrar shall not be required to destroy any such certificates.  The Security Registrar shall promptly deliver a certificate of disposition to the Trustee and the Company unless, by a Company Order, similarly delivered, the Company shall direct that canceled Securities be returned to it.  The Security Registrar shall promptly deliver evidence of any cancellation of a Security in accordance with this Section 309 to the Trustee and the Company.

SECTION 310.

COMPUTATION OF INTEREST.

Except as otherwise specified as contemplated by Section 301 for Securities of any series, or Tranche thereof, interest on the Securities of each series shall be computed on the basis of a 360-day year consisting of 12 30-day months, and with respect to any period less than a full month, on the basis of the actual number of days elapsed during such period.  For example, the interest for a period running from the 15th day of one month to the 15th day of the next month would be calculated on the basis of one 30-day month.

SECTION 311.

PAYMENT TO BE IN PROPER CURRENCY.

In the case of any Security denominated in any currency other than Dollars or in a composite currency (the “Required Currency”), except as otherwise specified with respect to such Security as contemplated by Section 301, the obligation of the Company to make any payment of the principal thereof, or the premium or interest thereon, shall not be discharged or satisfied by any tender by the Company, or recovery by the Trustee, in any currency other than the Required Currency, except to the extent that such tender or recovery shall result in the Trustee timely holding the full amount of the Required Currency then due and payable.  If any such tender or recovery is in a currency other than the Required Currency, the Trustee may take such actions as it considers appropriate to exchange such currency for the Required Currency.  The costs and risks of any such exchange, including without limitation the ris ks of delay and exchange rate fluctuation, shall be borne by the Company, the Company shall remain fully liable for any shortfall or delinquency in the full amount of Required Currency then due and payable, and in no circumstances shall the Trustee be liable therefor except in the case of its negligence or willful misconduct.

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SECTION 312.

EXTENSION OF INTEREST PAYMENT.

The Company shall have the right at any time, to extend interest payment periods on all the Securities of any series hereunder, if so specified as contemplated by Section 301 with respect to such Securities and upon such terms as may be specified as contemplated by Section 301 with respect to such Securities.

SECTION 313.

CUSIP NUMBERS.

The Company in issuing the Securities may use “CUSIP” or “ISIN” or other similar numbers (if then generally in use), and, if so, the Company, the Trustee or the Security Registrar may use “CUSIP” or “ISIN” or such other numbers in notices or redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only the other identification numbers printed on the Securities, in which case none of the Company or, as the case may be, the Trustee or the Security Registrar, or any agent of any of them, shall have any liability in respect of any CUSIP or “ISIN” or other number used on any such notice, and any such redemption shall not be affected by any defect in or omission of such nu mbers.

ARTICLE FOUR

ISSUANCE OF SECURITIES

SECTION 401.

ISSUANCE OF SECURITIES.

(a)

Securities of any one or more series may be authenticated and delivered in any aggregate principal amount so long as, after immediately giving effect thereto, to the concurrent redemption or payment of Securities or Secured Debt and any other transactions contemplated therewith, the aggregate principal amount of all Securities and Secured Debt, in each case then Outstanding, will not exceed 75% of the sum of (i) the then Cost or Fair Value, whichever is less, of all Property Additions (after making any deductions pursuant to Section 102(b)) and (ii) all Available Cash then held by, or deposited with, the Trustee.

(b)

Securities of any series shall be authenticated and delivered by the Trustee upon receipt by the Trustee of:

(i)

the documents with respect to the Securities of such series specified in Section 303;

(ii)

an Experts’ Certificate dated as of a date not more than 90 days prior to the first day of the month in which the Company Order referring to it is delivered to the Trustee,

(A)

setting forth the aggregate amount of Property Additions then owned by the Company, such amount to be computed by reference to the

47

Company’s financial statements, on a Dollar basis, and stating the Cost of such Property Additions;

(B)

stating that all such property reflected in clause (A) above constitutes Property Additions;

(C)

stating that such Property Additions are desirable for use in the conduct of the business, or one of the businesses, of the Company;

(D)

stating what part, if any, of such Property Additions includes property which had not been included in a previous Experts’ Certificate and which within six months prior to the date of acquisition thereof by the Company had been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company and stating whether or not, in the judgment of the signers, the Fair Value of such Property Additions to the Company, as of the date of such certificate, is more than $25,000 and more than 1% of the aggregate principal amount of Securities then Outstanding;

(E)

stating, in the judgment of the signers, the Fair Value to the Company, as of the date of such certificate, of such Property Additions, except any thereof with respect to the Fair Value to the Company of which a statement is to be made in an Independent Experts’ Certificate pursuant to clause (iii) below;

(F)

stating the lower of the Cost or the Fair Value to the Company of such Property Additions;

(G)

stating the aggregate principal amount of Securities and the aggregate principal amount of Secured Debt, in each case to be Outstanding immediately prior to the issuance of the Securities to be then authenticated and delivered;

(H)

stating the principal amount of Securities to be then authenticated and delivered;

(I)

stating that, immediately after giving effect to the issuance of the Securities to be then authenticated and delivered, to the concurrent redemption or payment of Securities or Secured Debt and any other transactions contemplated therewith, the aggregate principal amount of all Securities and Secured Debt, in each case then Outstanding, will not exceed 75% of the sum of (i) the amount set forth in clause (F) above, and (ii) all Available Cash;

(iii)

in case any Property Additions are shown by the Experts’ Certificate provided for in clause (ii) above to include property which had not been included in a previous Experts’ Certificate and which, within six months prior to the date of acquisition thereof by the Company, had been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company and such certificate does not show the Fair Value thereof to the Company, as of the date of such certificate, to be less than $25,000 or less than 1% of the aggregate principal amount of Securities then Outstanding, an Independent Experts’ Certificate

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stating, in the judgment of the signer, the Fair Value to the Company, as of the date of such Independent Experts’ Certificate, of (X) such Property Additions which have been so used or operated and (at the option of the Company) as to any other Property Additions included in the Experts’ Certificate provided for in clause (ii) above and (Y) in case such Independent Experts’ Certificate is being delivered in connection with the authentication and delivery of Securities, any property so used or operated which has been subjected to the Lien of this Mortgage since the commencement of the then current calendar year and as to which an Independent Experts’ Certificate has not previously been furnished to the Trustee;

(iv)

in case any Property Additions are shown by the Experts’ Certificate provided for in clause (ii) above to have not been included in a previous Experts’ Certificate and to have been acquired, made or constructed in whole or in part through the delivery of securities or other property, an Experts’ Certificate stating, in the judgment of the signers, the fair market value in cash of such securities or other property at the time of delivery thereof in payment for or for the acquisition of such Property Additions;

(v)

an Opinion of Counsel to the effect that:

(A)

this Mortgage constitutes, or, upon the delivery of, and/or the filing and/or recording in the proper places and manner of, the instruments of conveyance, assignment or transfer, if any, specified in said opinion, will constitute, a direct first mortgage lien, subject only to Permitted Liens, environmental “super lien” laws and specified Prior Liens, upon the interest of the Company in the Property Additions; provided, however, that on and after the Second Effective Date, said opinion may also contain an exception for all Prior Liens; and

(B)

the Company has corporate authority to operate such Property Additions; and

(vi)

copies of the instruments of conveyance, assignment and transfer, if any, specified in the Opinion of Counsel provided for in clause (v) above.

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ARTICLE FIVE

REDEMPTION OF SECURITIES

SECTION 501.

APPLICABILITY OF ARTICLE.

Securities of any series, or any Tranche thereof, which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of such series or Tranche) in accordance with this Article.

SECTION 502.

ELECTION TO REDEEM; NOTICE TO TRUSTEE.

The election of the Company to redeem any Securities shall be evidenced by a Board Resolution or an Officers’ Certificate.  The Company shall, at least 40 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the principal amount of such Securities to be redeemed.  In the case of any redemption of Securities (a) prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Mortgage or (b) pursuant to an election of the Company which is subject to a condition specified in the terms of such Securities, the Company shall furnish the Trustee with an Officers’ Certificate evidencing compliance with such restriction or condition.

SECTION 503.

SELECTION OF SECURITIES TO BE REDEEMED.

If less than all the Securities of any series, or any Tranche thereof, are to be redeemed, the particular Securities to be redeemed shall be selected by the Trustee from the Outstanding Securities of such series or Tranche not previously called for redemption, by such method as shall be provided for such particular series or Tranche, or in the absence of any such provision, by such method of random selection as the Trustee shall deem fair and appropriate and which may, in any case, provide for the selection for redemption of portions (equal to any authorized denomination for Securities of such series or Tranche) of the principal amount of Securities of such series or Tranche of a denomination larger than the minimum authorized denomination for Securities of such series or Tranche; provided, however, that if, as indicated in an Officers’ Certificate, the Company shall have offered to purchase all or any principal amount of the Securities then Outstanding of any series, or any Tranche thereof, and less than all of such Securities as to which such offer was made shall have been tendered to the Company for such purchase, the Trustee, if so directed by Company Order, shall select for redemption all or any principal amount of such Securities which have not been so tendered.

The Trustee shall promptly notify the Company and the Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected to be redeemed in part, the principal amount thereof to be redeemed.

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For all purposes of this Mortgage, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed.

SECTION 504.

NOTICE OF REDEMPTION.

Except as otherwise specified as contemplated by Section 301 for Securities of any series, notice of redemption shall be given in the manner provided in Section 107 to the Holders of the Securities to be redeemed not less than 30 days prior to the Redemption Date.

Except as otherwise specified as contemplated by Section 301 for Securities of any series, all notices of redemption shall state:

(a)

the Redemption Date,

(b)

the Redemption Price (if known),

(c)

if less than all the Securities of any series or Tranche are to be redeemed, the identification of the particular Securities to be redeemed and the portion of the principal amount of any Security to be redeemed in part,

(d)

that on the Redemption Date the Redemption Price, together with accrued interest, if any, to the Redemption Date, will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date,

(e)

the place or places where such Securities are to be surrendered for payment of the Redemption Price and accrued interest, if any, unless it shall have been specified as contemplated by Section 301 with respect to such Securities that such surrender shall not be required,

(f)

that the redemption is for a sinking or other fund, if such is the case,

(g)

the CUSIP, ISIN or other similar numbers, if any, assigned to such Securities; provided, however, that such notice may state that no representation is made as to the correctness of CUSIP or ISIN numbers, in which case none of the Company, the Trustee or any agent of the Company or the Trustee shall have any liability in respect of the use of any CUSIP or ISIN number or numbers on such notices, and the redemption of such Securities shall not be affected by any defect in or omission of such numbers, and

(h)

such other matters as the Company shall deem desirable or appropriate.

Unless otherwise specified with respect to any Securities in accordance with Section 301, with respect to any notice of redemption of Securities at the election of the Company, unless, upon the giving of such notice, such Securities shall be deemed to have

51

been paid in accordance with Section 801, such notice may state that such redemption shall be conditional upon the receipt by the Paying Agent or Agents for such Securities, on or prior to the date fixed for such redemption, of money sufficient to pay the principal of and premium, if any, and interest, if any, on such Securities and that if such money shall not have been so received such notice shall be of no force or effect and the Company shall not be required to redeem such Securities.  In the event that such notice of redemption contains such a condition and such money is not so received, the redemption shall not be made and within a reasonable time thereafter notice shall be given, in the manner in which the notice of redemption was given, that such money was not so received and such redemption was not required to be made.  A failure by the Company to provide such moneys or make provision for the payment thereof shall not constitute an Event of Default under this Mortgage and the Paying Agent or Agents for the Securities otherwise to have been redeemed shall promptly return to the Holders thereof any of such Securities which had been surrendered for payment upon such redemption.

Notice of redemption of Securities to be redeemed at the election of the Company, and any notice of non-satisfaction of a condition for redemption as aforesaid, shall be given by the Company or, at the Company’s request, by the Security Registrar in the name and at the expense of the Company.  Notice of any mandatory redemption of Securities shall be given by the Security Registrar in the name and at the expense of the Company.

SECTION 505.

SECURITIES PAYABLE ON REDEMPTION DATE.

Notice of redemption having been given as aforesaid, and the conditions, if any, set forth in such notice having been satisfied, the Securities or portions thereof so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless, in the case of an unconditional notice of redemption, the Company shall default in the payment of the Redemption Price and accrued interest, if any) such Securities or portions thereof, if interest-bearing, shall cease to bear interest.  Upon surrender of any such Security for redemption in accordance with such notice, such Security or portion thereof shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that no such surrender shall be a condition to such payment if so specified as contemplated by Section 301 with respec t to such Security; and provided, further, that except as otherwise specified as contemplated by Section 301 with respect to such Security, any installment of interest on any Security the Stated Maturity of which installment is on or prior to the Redemption Date shall be payable to the Holder of such Security, or one or more Predecessor Securities, registered as such at the close of business on the related Regular Record Date according to the terms of such Security and subject to the provisions of Sections 305 and 307.

SECTION 506.

SECURITIES REDEEMED IN PART.

Upon the surrender of any Security which is to be redeemed only in part at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), the

52

Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities of the same series and Tranche, of any authorized denomination requested by such Holder and of like tenor and in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered.

ARTICLE SIX

SINKING FUNDS

SECTION 601.

APPLICABILITY OF ARTICLE.

The provisions of this Article shall be applicable to any sinking fund for the retirement of the Securities of any series, or any Tranche thereof, except as otherwise specified as contemplated by Section 301 for Securities of such series or Tranche.

The minimum amount of any sinking fund payment provided for by the terms of Securities of any series, or any Tranche thereof, is herein referred to as a “mandatory sinking fund payment”, and any payment in excess of such minimum amount provided for by the terms of Securities of any series, or any Tranche thereof, is herein referred to as an “optional sinking fund payment”.  If provided for by the terms of Securities of any series, or any Tranche thereof, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 602.  Each sinking fund payment shall be applied to the redemption of Securities of the series or Tranche in respect of which it was made as provided for by the terms of such Securities.

SECTION 602.

SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.

The Company (a) may deliver to the Trustee Outstanding Securities (other than any previously called for redemption) of a series or Tranche in respect of which a mandatory sinking fund payment is to be made and (b) may apply as a credit Securities of such series or Tranche which have been redeemed either at the election of the Company pursuant to the terms of such Securities, at the election of the Holder thereof if applicable, or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of such mandatory sinking fund payment with respect to the Securities of such series; provided, however, that no Securities shall be applied in satisfaction of a mandatory sinking fund payment if such Securities shall have been previously so applied.  Securities so applied shall be received and credited for such purpose by the Trust ee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly.

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SECTION 603.

REDEMPTION OF SECURITIES FOR SINKING FUND.

Not less than 40 days, or such shorter period as the Trustee shall agree to, prior to each sinking fund payment date for the Securities of any series, or any Tranche thereof, the Company shall deliver to the Trustee an Officers’ Certificate specifying:

(a)

the amount of the next succeeding mandatory sinking fund payment for such series or Tranche;

(b)

the amount, if any, of the optional sinking fund payment to be made together with such mandatory sinking fund payment;

(c)

the aggregate sinking fund payment; and

(d)

the portion, if any, of such aggregate sinking fund payment which is to be satisfied by the payment of cash;

(e)

the portion, if any, of such aggregate sinking fund payment which is to be satisfied by delivering and crediting Securities of such series or Tranche pursuant to Section 602 and stating the basis for such credit and that such Securities have not previously been so credited, and the Company shall also deliver to the Trustee any Securities to be so delivered.

If the Company shall not deliver such Officers’ Certificate and, to the extent applicable, all such Securities, the next succeeding sinking fund payment for such series or Tranche shall be made entirely in cash in the amount of the mandatory sinking fund payment.  Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 503 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 504.  Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 505 and 506.

ARTICLE SEVEN

REPRESENTATIONS AND COVENANTS

SECTION 701.

PAYMENT OF SECURITIES; LAWFUL POSSESSION.

(a)

The Company shall pay the principal of and premium, if any, and interest, if any, on the Securities of each series in accordance with the terms of such Securities and this Mortgage.

(b)

The Company is lawfully possessed of the Mortgaged Property and has sufficient right and authority to mortgage and pledge the Mortgaged Property, as provided in and by this Mortgage.

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SECTION 702.

MAINTENANCE OF OFFICE OR AGENCY.

The Company shall maintain in each Place of Payment for the Securities of each series, or any Tranche thereof, an office or agency where payment of such Securities shall be made, where the registration of transfer or exchange of such Securities may be effected and where notices and demands to or upon the Company in respect of such Securities and this Mortgage may be served.  The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of each such office or agency and prompt notice to the Holders of any such change in the manner specified in Section 107.  If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, then payment of such Securities shall be made, registration of transfer or exchange thereof may be effected and notices and demands in respect of such Securities a nd this Mortgage may be served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent for all such purposes in any such event.

The Company may also from time to time designate one or more other offices or agencies with respect to the Securities of one or more series, or any Tranche thereof, for any or all of the foregoing purposes and may from time to time rescind such designations; provided, however, that, unless otherwise specified as contemplated by Section 301 with respect to the Securities of such series or Tranche, no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency for such purposes in each Place of Payment for such Securities in accordance with the requirements set forth above.  The Company shall give prompt written notice to the Trustee, and prompt notice to the Holders in the manner specified in Section 107, of any such designation or rescission and of any change in the location of any such other office or agency.

Anything herein to the contrary notwithstanding, any office or agency required by this Section may be maintained at an office of the Company or an Affiliate of the Company, in which event the Company or such Affiliate shall perform all functions to be performed at such office or agency.

SECTION 703.

MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.

If the Company shall at any time act as its own Paying Agent with respect to the Securities of any series, or any Tranche thereof, it shall, on or before each due date of the principal of and premium, if any, and interest, if any, on any of such Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and premium or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided.  The Company shall promptly notify the Trustee of any failure by the Company (or any other obligor on such Securities) to make any payment of principal of or premium, if any, or interest, if any, on such Securities.

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Whenever the Company shall have one or more Paying Agents for the Securities of any series, or any Tranche thereof, it shall, on or before each due date of the principal of and premium, if any, and interest, if any, on such Securities, deposit with such Paying Agents sums sufficient (without duplication) to pay the principal and premium or interest so becoming due, such sums to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of any failure by it so to act.

The Company shall cause each Paying Agent for the Securities of any series, or any Tranche thereof, other than the Company or the Trustee, to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee that, subject to the provisions of this Section, such Paying Agent shall:

(a)

hold all sums held by it for the payment of the principal of and premium, if any, or interest, if any, on such Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

(b)

give the Trustee notice of any failure by the Company (or any other obligor upon such Securities) to make any payment of principal of or premium, if any, or interest, if any, on such Securities; and

(c)

at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent and furnish to the Trustee such information as it possesses regarding the names and addresses of the Persons entitled to such sums.

The Company may at any time pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent and, if so stated in a Company Order delivered to the Trustee, in accordance with the provisions of Article Eight; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.

Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of and premium, if any, or interest, if any, on any Security and remaining unclaimed for two years after such principal and premium, if any, or interest, if any, has become due and payable shall to the extent permitted by law be paid to the Company on Company Request, or, if then held by the Company, shall be discharged from such trust; and, upon such payment or discharge, the Holder of such Security shall, as an unsecured general creditor and not as the Holder of an Outstanding Security, look only to the Company for payment of the amount so due and payable and remaining unpaid unless the applicable law provides otherwise, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such payment to the

56

Company, may at the expense of the Company cause to be mailed, on one occasion only, notice to such Holder that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such mailing, any unclaimed balance of such money then remaining will be paid to the Company.

SECTION 704.

CORPORATE EXISTENCE.

Subject to the rights of the Company under Article Twelve, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its legal existence as a corporation.

SECTION 705.

ANNUAL OFFICERS’ CERTIFICATE AS TO COMPLIANCE.

Not later than June 1 in each year, commencing the first calendar year after the occurrence of the First Effective Date, the Company shall deliver to the Trustee an Officers’ Certificate which need not comply with the requirements of Section 103, executed by the principal executive officer, the principal financial officer or the principal accounting officer of the Company and by any other Authorized Officer, as to (i) such officers’ knowledge of the Company’s compliance with all conditions and covenants under this Mortgage, such compliance to be determined without regard to any period of grace or requirement of notice under this Mortgage, and making any other statements as may be required by the Trust Indenture Act; and (ii) stating the aggregate principal amount of Secured Debt outstanding as of March 31 in such year.

SECTION 706.

WAIVER OF CERTAIN COVENANTS.

The Company may omit in any particular instance to comply with any term, provision or condition set forth in (a) Section 702 or any additional covenant or restriction specified with respect to the Securities of any series, or any Tranche thereof, as contemplated by Section 301, if before the time for such compliance the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series and Tranches with respect to which compliance with Section 702 or such additional covenant or restriction is to be omitted, considered as one class, shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition and (b) Section 704 or Article Twelve if before the time for such compliance the Holders of a majority in principal amount of Securities Outstanding under this Mortgage, considered as one class, shall, by Act of such H olders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition; but, in the case of (a) or (b), no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect.

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SECTION 707.

ISSUANCE OF SECURED DEBT

This Section 707 shall be of no force or effect until the Second Effective Date, but shall automatically become and be in full force and effect on and after the Second Effective Date.

The Company shall not issue any Secured Debt unless, after giving effect thereto, to the concurrent redemption or payment of Securities or Secured Debt and any other transactions contemplated thereby, (a) the Company would be permitted by the provisions of Section 401(a) to have authenticated and delivered at least $1.00 of additional Securities, and (b) the aggregate principal amount of Secured Debt then outstanding would not exceed 3% of the sum of (i) the then Cost or Fair Value, whichever is less, of all Property Additions (after making any deductions pursuant to Section 102(b)) and (ii) all Available Cash then held by, or deposited with, the Trustee, provided, however, that the foregoing restriction shall not in any way prevent or limit the Company from assuming indebtedness secured by Liens existing on property acquired by the Company after the Second Effective Date or placed thereon at the time of such acquisition thereof.  Any such assumed indebtedness secured by a Lien prior to or on a parity with the Lien of this Mortgage shall, for all other purposes of this Mortgage, constitute Secured Debt.

SECTION 708.

SALE AND LEASEBACK

Nothing in this Mortgage is intended to prevent the Company from entering into any Sale and Leaseback Transaction so long as the Company otherwise complies with the requirements of this Mortgage.

ARTICLE EIGHT

SATISFACTION AND DISCHARGE

SECTION 801.

SATISFACTION AND DISCHARGE OF SECURITIES.

Subsection (a) of this Section 801 shall be in full force and effect on and after the First Effective Date and shall automatically cease to be of any further force or effect on and after the Second Effective Date.  

(a)

The Company may provide for the payment or redemption of outstanding Securities of any series issued prior to [January 1, 2008] and interest thereon by depositing with the Trustee either (i) moneys in the necessary amount or (ii) Government Obligations, the principal of and the interest on which when due, and without any regard to reinvestment thereof, will, in the opinion of an independent accountant or other independent financial expert delivered to the Trustee, provide moneys which, together with the moneys, if any, deposited with or held by the Trustee, shall be sufficient to pay when due the principal of, premium (if any) and interest due and to become due on such Securities or portions thereof on the Redemption Date or Stated Maturity thereof, as the case may be.  When such sufficient moneys and/or obligations shall have been set apart by or deposited with the Trustee, with irrevocable direction so to apply the same (w ith or

58

without any additional right given to the Holders to surrender their Securities or obtain therefrom payment therefor prior to the Redemption Date) such Securities and interest thereon shall for all purposes under this Mortgage, including discharge of the covenants of the Company with respect to the Securities of such series, be deemed to have been paid (except as to any surviving rights of conversion, transfer or exchange of Securities herein or therein provided for); provided that in case of redemption the notice requisite to the validity of such redemption shall have been given or arrangements shall have been made ensuring to the satisfaction of the Trustee that the same will be given; and provided further that the Trustee need not accept such deposit unless it is accompanied by an Opinion of Counsel stating that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (b) since the date of thi s Mortgage there has been a change in applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of such Securities or the right of payment of interest thereon (as the case may be) will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and/or the ensuing discharge of this Mortgage and will be subject to federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, and/or discharge had not occurred. Upon such deposit, the obligation of the Company to duly and punctually pay or cause to be paid the principal of (and premium, if any) and interest on such Securities shall cease, terminate and be completely discharged and the Holders thereof shall thereafter be entitled to receive payment solely from the funds deposited with the Trustee as set forth above.

(b)

Any Security or Securities (provided, however, that prior to the Second Effective Date this subsection shall be applicable only to Securities issued after [January 1, 2008]), or any portion of the principal amount thereof, shall be deemed to have been paid and no longer Outstanding for all purposes of this Mortgage, and the entire indebtedness of the Company in respect thereof shall be deemed to have been satisfied and discharged, if there shall have been irrevocably deposited with the Trustee or any Paying Agent (other than the Company), in trust:

(i)

money in an amount which shall be sufficient, or

(ii)

in the case of a deposit made prior to the Maturity of such Securities or portions thereof, Eligible Obligations, which shall not contain provisions permitting the redemption or other prepayment thereof at the option of the issuer thereof, the principal of and the interest on which when due, without any regard to reinvestment thereof, will provide moneys which, together with the money, if any, deposited with or held by the Trustee or such Paying Agent, shall be sufficient, or

(iii)

a combination of (i) or (ii) which shall be sufficient to pay when due the principal of and premium, if any, and interest, if any, due and to become due on such Securities or portions thereof on or prior to Maturity;

provided, however, that in the case of the provision for payment or redemption of less than all the Securities of any series or Tranche, such Securities or portions thereof shall have

59

been selected by the Trustee as provided herein and, in the case of a redemption, the notice requisite to the validity of such redemption shall have been given or irrevocable authority shall have been given by the Company to the Trustee to give such notice, under arrangements satisfactory to the Trustee; and provided, further, that the Company shall have delivered to the Trustee and such Paying Agent:

(X)

if such deposit shall have been made prior to the Maturity of such Securities, a Company Order stating that the money and Eligible Obligations deposited in accordance with this Section shall be held in trust, as provided in Section 803;

(Y)

if Eligible Obligations shall have been deposited, an Opinion of Counsel to the effect that such obligations constitute Eligible Obligations and do not contain provisions permitting the redemption or other prepayment thereof at the option of the issuer thereof, and a report of an independent public accountant of nationally recognized standing, selected by the Company, to the effect that the other requirements set forth in clause (ii) and (iii) above have been satisfied; and

(Z)

if such deposit shall have been made prior to the Maturity of such Securities, an Officers’ Certificate stating the Company’s intention that, upon delivery of such Officers’ Certificate, its indebtedness in respect of such Securities or portions thereof will have been satisfied and discharged as contemplated in this Section.

Upon the deposit of money or Eligible Obligations, or both, in accordance with this Section, together with the documents required by clauses (X), (Y) and (Z) above, the Trustee shall, upon receipt of a Company Request, acknowledge in writing that the Security or Securities or portions thereof with respect to which such deposit was made are deemed to have been paid for all purposes of this Mortgage and that the entire indebtedness of the Company in respect thereof has been satisfied and discharged as contemplated in this Section.  In the event that all of the conditions set forth in the preceding paragraph shall have been satisfied in respect of any Securities or portions thereof except that, for any reason, the Officers’ Certificate specified in clause (Z) shall not have been delivered, such Securities or portions thereof shall nevertheless be deemed to have been paid for all purposes of this Mortgage, and t he Holders of such Securities or portions thereof shall nevertheless be no longer entitled to the benefits provided by this Mortgage or of any of the covenants of the Company under Article Seven (except the covenants contained in Sections 702 and 703) or any other covenants made in respect of such Securities or portions thereof as contemplated by Section 301 or Section 1301(b), but the indebtedness of the Company in respect of such Securities or portions thereof shall not be deemed to have been satisfied and discharged prior to Maturity for any other purpose and the Holders of such Securities or portions thereof shall continue to be entitled to look to the Company for payment of the indebtedness represented thereby; and, upon Company Request, the Trustee shall acknowledge in writing that such Securities or portions thereof are deemed to have been paid for all purposes of this Mortgage.

(c)

If payment at Stated Maturity of less than all of the Securities of any series, or any Tranche thereof, is to be provided for in the manner and with the effect provided in this Section, the Trustee shall select such Securities, or portions of principal amount

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thereof, in the manner specified by Section 503 for selection for redemption of less than all the Securities of a series or Tranche.

In the event that Securities which shall be deemed to have been paid for purposes of this Mortgage, and, if such is the case, in respect of which the Company’s indebtedness shall have been satisfied and discharged, all as provided in this Section, do not mature and are not to be redeemed within the 60-day period commencing with the date of the deposit of moneys or Eligible Obligations, as aforesaid, the Company shall, as promptly as practicable, give a notice, in the same manner as a notice of redemption with respect to such Securities, to the Holders of such Securities to the effect that such deposit has been made and the effect thereof.

Notwithstanding that any Securities shall be deemed to have been paid for purposes of this Mortgage, as aforesaid, the obligations of the Company and the Trustee in respect of such Securities under Sections 304, 305, 306, 504, 702, 703, 1007 and 1015 and this Article shall survive.

The Company shall pay, and shall indemnify the Trustee or any Paying Agent with which Eligible Obligations shall have been deposited as provided in this Section against, any tax, fee or other charge imposed on or assessed against such Eligible Obligations or the principal or interest received in respect of such Eligible Obligations, including, but not limited to, any such tax payable by any entity deemed, for tax purposes, to have been created as a result of such deposit.

Anything herein to the contrary notwithstanding, (a) if, at any time after a Security would be deemed to have been paid for purposes of this Mortgage, and, if such is the case, the Company’s indebtedness in respect thereof would be deemed to have been satisfied and discharged, pursuant to this Section (without regard to the provisions of this paragraph), the Trustee or any Paying Agent, as the case may be, (i) shall be required to return the money or Eligible Obligations, or combination thereof, deposited with it as aforesaid to the Company or its representative under any applicable Federal or State bankruptcy, insolvency or other similar law, or (ii) is unable to apply any money in accordance with this Article with respect to any Securities by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, such Security shall thereupon be deemed retroa ctively not to have been paid and any satisfaction and discharge of the Company’s indebtedness in respect thereof shall retroactively be deemed not to have been effected, and such Security shall be deemed to remain Outstanding and (b) any satisfaction and discharge of the Company’s indebtedness in respect of any Security shall be subject to the provisions of the last paragraph of Section 703.

SECTION 802.

SATISFACTION AND DISCHARGE OF MORTGAGE.

Subsection (a) of this Section 802 shall be in full force and effect on and after the First Effective Date and shall automatically cease to be of any further force or effect on and after the Second Effective Date.  Subsection (b) of this Section 802 shall be of no force

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or effect until the Second Effective Date, but shall automatically become and be in full force and effect on and after the Second Effective Date.

(a)

Whenever the following conditions shall exist, namely:

(i)

all Securities theretofore authenticated and delivered have been cancelled by the Trustee or delivered to the Trustee for cancellation, excluding, however:

(1)

Securities for the payment of which money has theretofore been deposited in trust with the Trustee or a Paying Agent (other than the Company) or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust as provided in Section 703;

(2)

Securities alleged to have been destroyed, lost or stolen which have been replaced or paid as provided in Section 306, except for any such Security which, prior to the satisfaction and discharge of this Mortgage, has been presented to the Trustee with a claim of ownership and enforceability by the Holder thereof and where enforceability has not been determined adversely against such Holder by a court of competent jurisdiction, and

(3)

Securities, the payment or redemption of which has been provided for in accordance with the provisions of Section 801;

(ii)

the Company has paid or caused to be paid all other sums payable hereunder by the Company; and

(iii)

the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each of which shall state that all conditions precedent herein provided for relating to the satisfaction and discharge of this Mortgage have been complied with;

then, upon Company Request authorized by a Board Resolution, this Mortgage and the lien, rights and interests created hereby shall cease, determine and become null and void (except as to any surviving rights of conversion, transfer or exchange of Securities herein or therein provided for) and the Trustee and each co-trustee and separate trustee, if any, then acting as such hereunder shall, at the expense of the Company, execute and deliver a termination statement and such instruments of satisfaction and discharge as may be necessary and pay, assign, transfer and deliver to the Company or upon Company Order all cash, securities and other personal property then held by it hereunder as a part of the Mortgaged Property.

In the absence of a Company Request authorized by a Board Resolution as aforesaid, the payment of all Outstanding Securities shall not render this Mortgage inoperative or prevent the Company from issuing Securities from time to time thereafter as herein provided.

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Notwithstanding the satisfaction and discharge of this Mortgage the obligations of the Company to the Trustee under Sections 304, 305, 306, 504, 702, 703, 1007 and 1015 shall survive.

(b)

This Mortgage shall upon Company Request cease to be of further effect (except as hereinafter expressly provided), and the Trustee, at the expense of the Company, shall execute such instruments as the Company shall reasonably request to evidence and acknowledge the satisfaction and discharge of this Mortgage, when:

(i)

no Securities remain Outstanding hereunder; and

(ii)

the Company has paid or caused to be paid all other sums payable hereunder by the Company;

provided, however, that if, in accordance with the last paragraph of Section 801, any Security, previously deemed to have been paid for purposes of this Mortgage, shall be deemed retroactively not to have been so paid, this Mortgage shall thereupon be deemed retroactively not to have been satisfied and discharged, as aforesaid, and to remain in full force and effect, and the Company shall execute and deliver such instruments as the Trustee shall reasonably request to evidence and acknowledge the same.

Notwithstanding the satisfaction and discharge of this Mortgage as aforesaid, the obligations of the Company and the Trustee under Sections 304, 305, 306, 504, 702, 703, 1007 and 1015 and this Article shall survive.

Upon satisfaction and discharge of this Mortgage as provided in this Section, the Trustee shall assign, transfer and turn over to the Company, subject to the lien provided by Section 1007, any and all money, securities and other property then held by the Trustee for the benefit of the Holders of the Securities (other than money and Eligible Obligations held by the Trustee pursuant to Section 803) and shall execute and deliver to the Company such instruments as, in the judgment of the Company, shall be necessary, desirable or appropriate to effect or evidence the satisfaction and discharge of this Mortgage.

SECTION 803.

APPLICATION OF TRUST MONEY.

Neither the Eligible Obligations nor the money deposited pursuant to Section 801, nor the principal or interest payments on any such Eligible Obligations, shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of and premium, if any, and interest, if any, on the Securities or portions of principal amount thereof in respect of which such deposit was made, all subject, however, to the provisions of Section 703; provided, however, that so long as there shall not have occurred and be continuing an Event of Default, any cash received from such principal or interest payments on such Eligible Obligations, if not then needed for such purpose, shall, to the extent practicable and upon Company Request and delivery to the Trustee of the documents referred to in clause (y) in the first paragraph of Section 801, be invested in Eligible Obligations of the type described i n clause (b) in the first paragraph of Section 801 maturing at such times and in such amounts as shall be sufficient, together with any other

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moneys and the proceeds of any other Eligible Obligations then held by the Trustee, to pay when due the principal of and premium, if any, and interest, if any, due and to become due on such Securities or portions thereof on and prior to the Maturity thereof, and interest earned from such reinvestment shall be paid over to the Company as received, free and clear of any trust, lien or pledge under this Mortgage (except the lien provided by Section 1007); and provided, further, that, so long as there shall not have occurred and be continuing an Event of Default, any moneys held in accordance with this Section on the Maturity of all such Securities in excess of the amount required to pay the principal of and premium, if any, and interest, if any, then due on such Securities shall be paid over to the Company free and clear of any trust, lien or pledge under this Mortgage (except the lien provided by Section 1007); and provided, further, that if an Even t of Default shall have occurred and be continuing, moneys to be paid over to the Company pursuant to this Section shall be held until such Event of Default shall have been waived or cured.

ARTICLE NINE

EVENTS OF DEFAULT; REMEDIES

SECTION 901.

EVENTS OF DEFAULT.

“Event of Default”, wherever used herein with respect to Securities, means any one of the following events:

(a)

Failure to pay any interest on any Security when it becomes due and payable and continuance of such default for a period of thirty (30) days; provided, however, that no such default shall constitute an “Event of Default” if the Company has made a valid extension of the interest payment period with respect to the Securities of such series, of which such Security is a part, if so provided as contemplated by Section 301; or

(b)

Failure to pay the principal of or premium, if any, on any Security when it becomes due and payable; provided, however, that no such default shall constitute an “Event of Default” if the Company has made a valid extension of the Maturity of the Securities of the series, of which such Security is a part, if so provided as contemplated by Section 301; or

(c)

Failure to perform or breach of, any covenant or warranty of the Company in this Mortgage (other than a covenant or warranty a default in the performance of which or breach of which is elsewhere in this Section specifically addressed) and continuance of such default or breach for a period of thirty (30) days after there has been given, by registered or certified mail, to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least 33% in aggregate principal amount of the Outstanding Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder, unless the Trustee, or the Trustee and the Holders of a principal amount of Securities not less than the principal amount of Securities the Holders of which gave such notice, as the case may be, shall agree in writing to an extension of such period prior to its expiration; provided, however, that the Trustee, or the Trustee and the Holders of such principal amount of

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Securities, as the case may be, shall be deemed to have agreed to an extension of such period if corrective action is initiated by the Company within such period and is being diligently pursued; or

(d)

The entry by a court having jurisdiction in the premises of (1) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (2) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition by one or more Persons other than the Company seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State bankruptcy, insolvency or similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official for the Company or for any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order for relief or any such other decree or order shall have remained unstayed and in effect for a period o f 90 consecutive days; or

(e)

The commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Company to the entry of a decree or order for relief in respect of the Company in a case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State bankruptcy, insolvency, reorganization or similar law, or the consent by the Company to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar offic ial of the Company or of any substantial part of its property, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of its inability to pay its debts generally as they become due, or the authorization of such action by the Board of Directors of the Company; or

(f)

any other Event of Default with respect to Securities of such series as shall have been specified in the terms thereof as contemplated by Section 301(o).

SECTION 902.

ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

If an Event of Default shall have occurred and be continuing, then in every such case the Trustee or the Holders of not less than a majority in principal amount of the Outstanding Securities may declare the principal amount (or, if any of the Securities of such series are Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof as contemplated by Section 301) of all of the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon receipt by the Company of notice of such

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declaration such principal amount (or specified amount) together with premium, if any, and accrued and unpaid interest shall become immediately due and payable.

(a)

At any time prior to the Second Effective Date and after such a declaration of acceleration of the maturity of the Securities then Outstanding shall have been made, but before any sale of any of the Mortgaged Property has been made and before a judgment or decree for payment of the money due shall have been obtained by the Trustee as provided in this Article, the Holders of not less than a majority in principal amount of the Outstanding Securities may, by written notice to the Company and the Trustee, rescind and annul such declaration and its consequences if

(i)

the Company has deposited with the Trustee a sum sufficient to pay

(A)

all overdue installments of interest on all Securities,

(B)

the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities,

(C)

interest upon overdue installments of interest at the rate or rates prescribed therefor in the Securities, and

(D)

all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel;

and

(ii)

all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or have been waived as provided in Section 913.  No such rescission and annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

(b)

At any time on and after the Second Effective Date and after such a declaration of acceleration of the maturity of the Securities then Outstanding shall have been made, but before any sale of any of the Mortgaged Property has been made and before a judgment or decree for payment of the money due shall have been obtained by the Trustee as provided in this Article, the Event or Events of Default giving rise to such declaration of acceleration shall, without further act, be deemed to have been cured, and such declaration and its consequences shall, without further act, be deemed to have been rescinded and annulled, if

(i)

the Company shall have paid or deposited with the Trustee a sum sufficient to pay

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(A)

all overdue interest, if any, on all Securities then Outstanding;

(B)

the principal of and premium, if any, on any Securities then Outstanding which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities;

(C)

to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities;

(D)

all amounts due to the Trustee under Section 1007;

and

(ii)

all Events of Default, other than the non-payment of the principal of Securities of such series which shall have become due solely by such declaration of acceleration, shall have been cured or waived as provided in Section 913.

No such rescission shall affect any subsequent Event of Default or impair any right consequent thereon.

SECTION 903.

COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.

If an Event of Default described in clause (a) or (b) of Section 901 shall have occurred, the Company shall, upon demand of the Trustee, pay to it, for the benefit of the Holders of the Securities with respect to which such Event of Default shall have occurred, the whole amount then due and payable on such Securities for principal and premium, if any, and interest, if any, and, to the extent permitted by law, interest on premium, if any, and on any overdue principal and interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover any amounts due to the Trustee under Section 1007.

If the Company shall fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated.

If an Event of Default shall have occurred and be continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Mortgage or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

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SECTION 904.

TRUSTEE MAY FILE PROOFS OF CLAIM.

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,

(a)

to file and prove a claim for the whole amount of principal, premium, if any, and interest, if any, owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for amounts due to the Trustee under Section 1007 and any claims of the Trustee as holder of Secured Debt) and of the Holders allowed in such judicial proceeding, and

(b)

to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amounts due it under Section 1007.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

SECTION 905.

TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.

All rights of action and claims under this Mortgage or the Securities may be prosecuted and enforced by the Trustee, without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders in respect of which such judgment has been recovered.

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SECTION 906.

APPLICATION OF MONEY COLLECTED.

Any money collected by the Trustee pursuant to this Article shall be applied in the following order, to the extent permitted by law, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or premium, if any, or interest, if any, upon presentation of the Securities in respect of which or for the benefit of which such money shall have been collected and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

FIRST: To the payment of all amounts due the Trustee under Section 1007;

SECOND: To the payment of the amounts then due and unpaid upon the Securities for principal of and premium, if any, and interest, if any, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal, premium, if any, and interest, if any, respectively; and

THIRD: To the payment of the remainder, if any, to the Company or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

SECTION 907.

LIMITATION ON SUITS.

No Holder shall have any right to institute any proceeding, judicial or otherwise, with respect to this Mortgage, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

(a)

such Holder shall have previously given written notice to the Trustee of a continuing Event of Default;

(b)

the Holders of a majority in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;

(c)

such Holder or Holders shall have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

(d)

the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such proceeding; and

(e)

no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities;

it being understood and intended that no one or more of the Holders of any Securities shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Mortgage to affect, disturb or prejudice the rights of any other Holders or to obtain or to

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seek to obtain priority or preference over any other Holders or to enforce any right under this Mortgage, except in the manner herein provided and for the equal and ratable benefit of all Holders.

SECTION 908.

UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST.

Notwithstanding any other provision in this Mortgage, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and premium, if any, and (subject to Section 307) interest, if any, on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, subject to Section 504, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

SECTION 909.

RESTORATION OF RIGHTS AND REMEDIES.

If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Mortgage and such proceeding shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and such Holder shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and such Holder shall continue as though no such proceeding had been instituted.

SECTION 910.

RIGHTS AND REMEDIES CUMULATIVE.

Except as otherwise provided in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

SECTION 911.

DELAY OR OMISSION NOT WAIVER.

No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein.  Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

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SECTION 912.

CONTROL BY HOLDERS OF SECURITIES.

If an Event of Default shall have occurred and be continuing, the Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to such Securities; provided, however, that

(a)

such direction shall not be in conflict with any rule of law or with this Mortgage, and could not involve the Trustee in personal liability in circumstances where indemnity would not, in the Trustee’s sole discretion, be adequate, and

(b)

the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

SECTION 913.

WAIVER OF PAST DEFAULTS.

Subsection (a) of this Section 913 shall be in full force and effect on and after the First Effective Date and shall automatically cease to be of any further force or effect on and after the Second Effective Date.  Subsection (b) of this Section 913 shall be of no force or effect until the Second Effective Date, but shall automatically become and be in full force and effect on and after the Second Effective Date.

(a)

Before any sale of any of the Mortgaged Property has been made under this Article or any judgment or decree for payment of money due has been obtained by the Trustee as provided in this Article, at any time prior to the Second Effective Date, the Holders of not less than a majority in principal amount of the Securities Outstanding may, by Act of such Holders delivered to the Trustee and the Company, on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default

(i)

in the payment of the principal of (or premium, if any) or interest on any Security, or

(ii)

in respect of a covenant or provision hereof which under Article Thirteen cannot be modified or amended without the consent of the Holder of each Outstanding Security affected.

Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Mortgage; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

(b) At any time from and after the Second Effective Date, the Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default:

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(i)

in the payment of the principal of or premium, if any, or interest, if any, on any Outstanding Security, or

(ii)

in respect of a covenant or provision hereof which under Section 1302 cannot be modified or amended without the consent of the Holder of each Outstanding Security of any series or Tranche affected.

Upon any such waiver, such default shall cease to exist, and any and all Events of Default arising therefrom shall be deemed to have been cured, for every purpose of this Mortgage; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

SECTION 914.

UNDERTAKING FOR COSTS.

The Company and the Trustee agree, and each Holder by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Mortgage, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in aggregate principal amount o f the Securities then Outstanding, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or premium, if any, or interest, if any, on any Security on or after the Stated Maturity or Maturities expressed in such Security (or in the case of redemption, on or after the Redemption Date).

SECTION 915.

WAIVER OF USURY, STAY OR EXTENSION LAWS.

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Mortgage; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

SECTION 916.

DEFAULTS UNDER PRIOR LIENS.

In addition to every other right and remedy provided herein, the Trustee may (but shall not be obligated to) exercise any right or remedy available to the Trustee in its capacity as owner and holder of any Secured Debt which arises as a result of a default or matured event of default under any Prior Lien, whether or not an Event of Default shall then have occurred and be continuing.

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SECTION 917.

RECEIVER AND OTHER REMEDIES.

If an Event of Default shall have occurred and, during the continuance thereof, the Trustee shall have commenced judicial proceedings to enforce any right under this Mortgage, the Trustee shall, to the extent permitted by law, be entitled, as against the Company, to the appointment of a receiver of the Mortgaged Property and subject to the rights, if any, of others to receive collections from former, present or future customers of the rents, issues, profits, revenues and other income thereof, and whether or not any receiver is appointed, the Trustee shall be entitled to retain possession and control of, and to collect and receive the income from cash, securities and other personal property held by the Trustee hereunder and to all other remedies available to mortgagees and secured parties under the Uniform Commercial Code or any other applicable law.

ARTICLE TEN

THE TRUSTEE

SECTION 1001.

CERTAIN DUTIES AND RESPONSIBILITIES.

(a)

The Trustee shall have and be subject to all the duties and responsibilities specified with respect to a Mortgage trustee in the Trust Indenture Act and no implied covenants or obligations shall be read into this Mortgage against the Trustee.  For purposes of Sections 315(a) and 315(c) of the Trust Indenture Act, the term “default” is hereby defined as an Event of Default which has occurred and is continuing.

(b)

No provision of this Mortgage shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(c)

Notwithstanding anything contained in this Mortgage to the contrary, the duties and responsibilities of the Trustee under this Mortgage shall be subject to the protections, exculpations and limitations on liability afforded to a Mortgage trustee under the provisions of the Trust Indenture Act.  For the purposes of Sections 315(b) and 315(d)(2) of the Trust Indenture Act, the term “responsible officer” is hereby defined as a Responsible Officer.  

(d)

Whether or not therein expressly so provided, every provision of this Mortgage relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.

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SECTION 1002.

NOTICE OF DEFAULTS.

The Trustee shall give notice of any default hereunder known to the Trustee in the manner and to the extent required to do so by the Trust Indenture Act, unless such default shall have been cured or waived; provided, however, that in the case of any default of the character specified in Section 901(c), no such notice to Holders shall be given until at least 60 days after the occurrence thereof.  For the purpose of this Section, the term “default” means any event which is, or after notice or lapse of time, or both, would become, an Event of Default.

SECTION 1003.

CERTAIN RIGHTS OF TRUSTEE.

Subject to the provisions of Section 1001 and to the applicable provisions of the Trust Indenture Act:

(a)

the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)

any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order, or as otherwise expressly provided herein, and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;

(c)

whenever in the administration of this Mortgage the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers’ Certificate;

(d)

the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(e)

the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Mortgage at the request or direction of any Holder pursuant to this Mortgage, unless such Holder shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

(f)

the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the

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Trustee shall determine to make such further inquiry or investigation, it shall (subject to applicable legal requirements) be entitled to examine, during normal business hours, the books, records and premises of the Company, personally or by agent or attorney;

(g)

the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;

(h)

the Trustee shall not be charged with knowledge of any default (as defined in Section 1002) or Event of Default unless either (1) a Responsible Officer of the Trustee shall have actual knowledge of such default or Event of Default or (2) written notice of such default or Event of Default shall have been given to the Trustee by the Company or any other obligor on such Securities, or by any Holder of such Securities.  

(i)

the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder; and

(j)

the Trustee shall not be liable for any action taken, suffered or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Mortgage.

SECTION 1004.

NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.

The recitals contained herein and in the Securities (except the Trustee’s certificates of authentication) shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes responsibility for their correctness.  The Trustee makes no representations as to the value or condition of the Mortgaged Property, the title of the Company to the Mortgaged Property, the security afforded by the Lien of this Mortgage, the validity or genuineness of any securities deposited with the Trustee hereunder, or the validity or sufficiency of this Mortgage or of the Securities.  Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof or any money paid to the Company hereunder.

SECTION 1005.

MAY HOLD SECURITIES.

Each of the Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 1008 and 1013, may otherwise deal with the Company with the same rights it would have if it were not the Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent.

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SECTION 1006.

MONEY HELD IN TRUST.

Money held by the Trustee in trust hereunder need not be segregated from other funds, except to the extent required by law.  The Trustee shall be under no liability for interest on or investment of any money received by it hereunder except as expressly provided herein or otherwise agreed with, and for the sole benefit of, the Company.

SECTION 1007.

COMPENSATION AND REIMBURSEMENT.

The Company shall

(a)

pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

(b)

except as otherwise expressly provided herein, reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances reasonably incurred or made by the Trustee in accordance with any provision of this Mortgage (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except to the extent that any such expense, disbursement or advance may be attributable to the Trustee’s negligence, willful misconduct or bad faith; and

(c)

indemnify the Trustee for, and hold it harmless from and against, any loss, liability or expense reasonably incurred by it arising out of or in connection with the acceptance or administration of the trust or trusts hereunder or the performance of its duties hereunder, including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder except to the extent any such loss, liability or expense may be attributable to its negligence, willful misconduct or bad faith.

As security for the performance of the obligations of the Company under this Section, the Trustee shall have a lien prior to the Securities upon the Mortgaged Property and all property and funds held or collected by the Trustee as such, other than property and funds held in trust under Section 803 (except moneys payable to the Company as provided in Section 803).

In addition and without prejudice to the rights provided to the Trustee under any of the provisions of this Mortgage, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 901(d) or Section 901(e), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal and State bankruptcy, insolvency or other similar law.

The Company’s obligations under this Section 1007 and the Lien referred to in this Section 1007 shall survive the resignation or removal of the Trustee, the discharge of the Company’s obligations under Article Eight of this Mortgage and/or the termination of this Mortgage.

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“TRUSTEE” for purposes of this Section 1007 shall include any predecessor Trustee; provided, however, that the negligence, willful misconduct or bad faith of any Trustee hereunder shall not affect the rights of any other Trustee hereunder.

SECTION 1008.

DISQUALIFICATION; CONFLICTING INTERESTS.

If the Trustee shall have or acquire any conflicting interest within the meaning of the Trust Indenture Act, it shall either eliminate such conflicting interest or resign to the extent, in the manner and with the effect, and subject to the conditions, provided in the Trust Indenture Act and this Mortgage.  For purposes of Section 310(b)(1) of the Trust Indenture Act and to the extent permitted thereby, the Trustee, in its capacity as trustee in respect of the Securities of any series, shall not be deemed to have a conflicting interest arising from its capacity as trustee in respect of the Securities of any other series issued under this Mortgage.  Nothing herein shall prevent the Company or the Trustee from filing with the Commission an application of the type referred to in clause (ii) of paragraph (1) or in the second to last paragraph of Section 310(b) of the Trust Indenture Act.

SECTION 1009.

CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

There shall at all times be a Trustee hereunder which shall be

(a)

a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal, State or District of Columbia authority, or

(b)

if and to the extent permitted by the Commission by rule, regulation or order upon application, a corporation or other Person organized and doing business under the laws of a foreign government, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 or the Dollar equivalent of the applicable foreign currency and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, and, in either case, qualified and eligible under this Article and the Trust Indenture Act.  If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporat ion shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section and the Trust Indenture Act, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

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SECTION 1010.

RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

(a)

No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 1011.

(b)

The Trustee may resign at any time by giving written notice thereof to the Company.  If the instrument of acceptance by a successor Trustee required by Section 1011 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c)

The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Trustee and the Company.

(d)

If at any time:

(i)

the Trustee shall fail to comply with Section 1008 after written request therefor by the Company or by any Holder who has been a bona fide Holder for at least 6 months, or

(ii)

the Trustee shall cease to be eligible under Section 1009 or Section 310(a) of the Trust Indenture Act and shall fail to resign after written request therefor by the Company or by any such Holder, or

(iii)

the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, (x) the Company by Board Resolutions may remove the Trustee with respect to all Securities or (y) subject to Section 914, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.

(e)

If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause (other than as contemplated by clause (y) in subsection (d) of this Section), the Company, by Board Resolutions, shall promptly appoint a successor Trustee or Trustees and shall comply with the applicable requirements of Section 1011.  If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the

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applicable requirements of Section 1011, become the successor Trustee and to that extent supersede the successor Trustee appointed by the Company.  If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 1011, any Holder who has been a bona fide Holder of a Security of such series for at least 6 months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.

(f)

So long as no event which is, or after notice or lapse of time, or both, would become, an Event of Default shall have occurred and be continuing, and except with respect to a Trustee appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities pursuant to subsection (e) of this Section, if the Company shall have delivered to the Trustee (i) Board Resolutions appointing a successor Trustee, effective as of a date specified therein, and (ii) an instrument of acceptance of such appointment, effective as of such date, by such successor Trustee in accordance with Section 1011, the Trustee shall be deemed to have resigned as contemplated in subsection (b) of this Section, the successor Trustee shall be deemed to have been appointed by the Company pursuant to subsection (e) of this Section and such appointment shall be deemed to have been accepted as contemplated in Section 1011, all as of such date, a nd all other provisions of this Section and Section 1011 shall be applicable to such resignation, appointment and acceptance except to the extent inconsistent with this subsection (f).

(g)

The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders of Securities in the manner provided in Section 107.  Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

SECTION 1011.

ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

(a)

In case of the appointment hereunder of a successor Trustee, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of all sums owed to it, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its Lien provided for in Section 1007.

(b)

Upon request of any such successor Trustee, the Company shall execute any instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in subsection (a) of this Section.

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(c)

No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.

SECTION 1012.

MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto.  In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.

SECTION 1013.

PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

If the Trustee shall be or become a creditor of the Company or any other obligor upon the Securities (other than by reason of a relationship described in Section 311(b) of the Trust Indenture Act), the Trustee shall be subject to any and all applicable provisions of the Trust Indenture Act regarding the collection of claims against the Company or such other obligor.  For purposes of Section 311(b) of the Trust Indenture Act (a) the term “cash transaction” shall have the meaning provided in Rule 11b-4 under the Trust Indenture Act, and (b) the term “self-liquidating paper” shall have the meaning provided in Rule 11b-6 under the Trust Indenture Act.

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SECTION 1014.

CO-TRUSTEE AND SEPARATE TRUSTEES.

At any time or times, for the purpose of meeting the legal requirements of any applicable jurisdiction, the Company and the Trustee shall have power to appoint, and, upon the written request of the Trustee or of the Holders of at least 33% in principal amount of the Securities then Outstanding, the Company shall for such purpose join with the Trustee in the execution and delivery of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Trustee either to act as co-trustee, jointly with the Trustee, or to act as separate trustee, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons, in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section.  If the Company does not join in such appointment within 15 days after the recei pt by it of a request so to do, or if an Event of Default shall have occurred and be continuing, the Trustee alone shall have power to make such appointment.

Should any written instrument or instruments from the Company be required by any co-trustee or separate trustee to more fully confirm to such co-trustee or separate trustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Company.

Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following conditions:

(a)

the Securities shall be authenticated and delivered, and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely, by the Trustee;

(b)

the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed either by the Trustee or by the Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee.

(c)

the Trustee at any time, by an instrument in writing executed by it, with the concurrence of the Company, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, if an Event of Default shall have occurred and be continuing, the Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Company.  Upon the written request of the Trustee, the Company shall join with the Trustee in the execution and delivery of all instruments and agreements necessary or

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proper to effectuate such resignation or removal.  A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section;

(d)

no co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Trustee, or any other such trustee hereunder, and the Trustee shall not be personally liable by reason of any act or omission of any such co-trustee or separate trustee; and

(e)

any Act of Holders delivered to the Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee.

SECTION 1015.

APPOINTMENT OF AUTHENTICATING AGENT.

The Trustee may appoint an Authenticating Agent or Agents with respect to the Securities of one or more series, or any Tranche thereof, which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series or Tranche issued upon original issuance, exchange, registration of transfer or partial redemption thereof or pursuant to Section 506, and Securities so authenticated shall be entitled to the benefits of this Mortgage and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder.  Wherever reference is made in this Mortgage to the authentication and delivery of Securities by the Trustee or the Trustee’s certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent.  Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State or territory thereof or the District of Columbia or the Commonwealth of Puerto Rico, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority.  If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.

Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.

An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and the Company.  The Trustee may at any time terminate the agency of an

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Authenticating Agent by giving written notice thereof to such Authenticating Agent and the Company.  Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company.  Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent.  No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.

The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section.

The provisions of Sections 308, 1004 and 1005 shall be applicable to each Authenticating Agent.

If an appointment with respect to the Securities of one or more series, or any Tranche thereof, shall be made pursuant to this Section, the Securities of such series or Tranche may have endorsed thereon, in addition to the Trustee’s certificate of authentication, an alternate certificate of authentication substantially in the following form:

This is one of the Securities of the series designated therein referred to in the within-mentioned Mortgage.

The Bank of New York Mellon Trust Company, N.A., Trustee,

By______________________

Authorized Officer

If all of the Securities of a series may not be originally issued at one time, and if the Trustee does not have an office capable of authenticating Securities upon original issuance located in a Place of Payment where the Company wishes to have Securities of such series authenticated upon original issuance, the Trustee, if so requested by the Company in writing (which writing need not comply with Section 103 and need not be accompanied by an Opinion of Counsel), shall appoint, in accordance with this Section and in accordance with such procedures as shall be acceptable to the Trustee, an Authenticating Agent having an office in a Place of Payment designated by the Company with respect to such series of Securities.

ARTICLE ELEVEN

HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 1101.

LISTS OF HOLDERS.

Semiannually, not later than June 1 and December 1 in each year, commencing with the first calendar year after the occurrence of the First Effective Date, and at such

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other times as the Trustee may request in writing, the Company shall furnish or cause to be furnished to the Trustee information as to the names and addresses of the Holders, and the Trustee shall preserve such information and similar information received by it in any other capacity and afford to the Holders access to information so preserved by it, all to such extent, if any, and in such manner as shall be required by the Trust Indenture Act; provided, however, that no such list need be furnished so long as the Trustee shall be the Security Registrar.

SECTION 1102.

REPORTS BY TRUSTEE AND COMPANY.

Not later than November 1 in each year, commencing with the first calendar year after the occurrence of the First Effective Date, the Trustee shall transmit to the Holders, the Commission and each securities exchange upon which any Securities are listed, a report, dated as of the next preceding September 15, with respect to any events and other matters described in Section 313(a) of the Trust Indenture Act, in such manner and to the extent required by the Trust Indenture Act.  The Trustee shall transmit to the Holders, the Commission and each securities exchange upon which any Securities are listed, and the Company shall file with the Trustee (within 30 days after filing with the Commission in the case of reports which pursuant to the Trust Indenture Act must be filed with the Commission and furnished to the Trustee) and transmit to the Holders, such other information, reports and other documents, if any, at such times and in such manner, as shall be required by the Trust Indenture Act.  The Company shall notify the Trustee of the listing of any Securities on any securities exchange.

Delivery of such reports, information and documents to the Trustee is for informational purposes only, and the Trustee’s receipt of such shall not constitute notice or constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

The Company shall file with the Trustee (within 30 days after filing with the Commission in the case of reports that pursuant to the Trust Indenture Act must be filed with the Commission and furnished to the Trustee) and transmit to the Holders, such other information, reports and other documents, if any, at such times and in such manner, as shall be required by the Trust Indenture Act.

ARTICLE TWELVE

CONSOLIDATION, MERGER, CONVEYANCE, OR OTHER TRANSFER

SECTION 1201.

COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.

The Company shall not consolidate with or merge into any other corporation, or convey or otherwise transfer, or lease, as, or substantially as, an entirety the Company’s Gas Utility Property to any Person, unless:

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(a)

the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or other transfer, or which leases, as or substantially as an entirety such Gas Utility Property shall be a corporation organized and existing under the laws of the United States, any State or Territory thereof or the District of Columbia (such corporation being hereinafter sometimes called the “Successor Company”) and shall execute and deliver to the Trustee a Mortgage supplemental hereto, in form recordable and reasonably satisfactory to the Trustee, which:

(i)

in the case of a consolidation, merger, conveyance or other transfer, or in the case of a lease if the term thereof extends beyond the last Stated Maturity of the Securities then Outstanding, contains an express assumption by the Successor Company of the due and punctual payment of the principal of and premium, if any, and interest, if any, on all the Securities then Outstanding and the performance and observance of every covenant and condition of this Mortgage to be performed or observed by the Company, and

(ii)

in the case of a consolidation, merger, conveyance or other transfer, contains a grant, conveyance, transfer and mortgage by the Successor Company, of the same tenor of the Granting Clauses herein,

(A)

confirming the Lien of this Mortgage on the Mortgaged Property (as constituted immediately prior to the time such transaction became effective) and subjecting to the Lien of this Mortgage all property, real, personal and mixed, thereafter acquired by the Successor Company which shall constitute an improvement, extension or addition to the Mortgaged Property (as so constituted) or a renewal, replacement or substitution of or for any part or parts thereof, and,

(B)

at the election of the Successor Company, subjecting to the Lien of this Mortgage such property, real, personal or mixed, in addition to the property described in subclause (A) above, then owned or thereafter acquired by the Successor Company as the Successor Company shall, in its sole discretion, specify or describe therein,

and the Lien confirmed or created by such grant, conveyance, transfer and mortgage shall have force, effect and standing similar to those which the Lien of this Mortgage would have had if the Company had not been a party to such consolidation, merger, conveyance or other transfer and had itself, after the time such transaction became effective, purchased, constructed or otherwise acquired the property subject to such grant, conveyance, transfer and mortgage;

(b)

in the case of a lease, such lease shall be made expressly subject to termination at any time during the continuance of an Event of Default, by (i) the Company or the Trustee and (ii) the purchaser of the property so leased at any sale thereof hereunder, whether such sale be made under the power of sale hereby conferred or pursuant to judicial proceedings;

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(c)

the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel each of which shall state that such consolidation, merger, conveyance or other transfer or lease, and such supplemental Mortgage, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with; and

(d)

immediately after giving effect to such transaction (and treating any Debt that becomes an obligation of the Successor Company as a result of such transaction as having been incurred by the Successor Company at the time of such transaction), no Event of Default shall have occurred and be continuing.

As used in this Article and in Section 1610(d), the terms “improvement”, “extension” and “addition” shall be limited to (a) with respect to real property subject to the Lien of this Mortgage, any item of personal property which has been so affixed or attached to such real property as to be regarded a part of such real property under applicable law and (b) with respect to personal property subject to the Lien of this Mortgage, any improvement, extension or addition to such personal property which (i) is made to maintain, renew, repair or improve the function of such personal property and (ii) is physically installed in or affixed to such personal property.

SECTION 1202.

SUCCESSOR COMPANY SUBSTITUTED.

Upon any consolidation or merger or any conveyance or other transfer of, as or substantially as an entirety the Company’s Gas Utility Property in accordance with Section 1201, the Successor Company shall succeed to, and be substituted for, and may exercise every power and right of, the Company under this Mortgage with the same effect as if such Successor Company had been named as the “Company” herein.  Without limiting the generality of the foregoing:

(a)

all property of the Successor Company then subject to the Lien of this Mortgage, of the character described in Section 102, shall constitute Property Additions;

(b)

the Successor Company may execute and deliver to the Trustee, and thereupon the Trustee shall, subject to the provisions of Article Four, authenticate and deliver, Securities meeting the requirements of Article Four; and

(c)

the Successor Company may, subject to the applicable provisions of this Mortgage, use Property Additions for any other purpose under the Mortgage.

All Securities so executed by the Successor Company, and authenticated and delivered by the Trustee, shall in all respects be entitled to the benefit of the Lien of this Mortgage equally and ratably with all Securities executed, authenticated and delivered prior to the time such consolidation, merger, conveyance or other transfer became effective.

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SECTION 1203.

EXTENT OF LIEN HEREOF ON PROPERTY OF SUCCESSOR COMPANY.

Unless, in the case of a consolidation, merger, conveyance or other transfer contemplated by Section 1201, the Mortgage supplemental hereto contemplated in Section 1201 or in Article Thirteen expressly provides otherwise, neither this Mortgage nor such supplemental Mortgage shall become or be, or be required to become or be, a Lien upon any of the properties:

(a)

owned by the Successor Company or any other party to such transaction (other than the Company) immediately prior to the time of effectiveness of such transaction or

(b)

acquired by the Successor Company at or after the time of effectiveness of such transaction, except, in either case, properties acquired from the Company in or as a result of such transaction and improvements, extensions or additions to such properties and renewals, replacements or substitutions of or for any part or parts thereof.

SECTION 1204.

RELEASE OF COMPANY UPON CONVEYANCE OR OTHER TRANSFER.

In the case of a conveyance or other transfer to any Person or Persons as contemplated in Section 1201, upon the satisfaction of all the conditions specified in Section 1201 the Company (such term being used in this Section without giving effect to such transaction) shall be released and discharged from all obligations and covenants under this Mortgage and on and under all Securities then Outstanding (unless the Company shall have delivered to the Trustee an instrument in which it shall waive such release and discharge) and, upon request by the Company, the Trustee shall acknowledge in writing that the Company has been so released and discharged.

SECTION 1205.

MERGER INTO COMPANY; EXTENT OF LIEN HEREOF.

(a)

Nothing in this Mortgage shall be deemed to prevent or restrict any consolidation or merger after the consummation of which the Company would be the surviving or resulting corporation or any conveyance or other transfer, or lease, of any part of the Company’s Gas Utility Property which does not constitute the entirety or substantially the entirety of its Gas Utility Property.

(b)

Unless, in the case of a consolidation or merger described in subsection (a) of this Section, an Mortgage supplemental hereto shall otherwise provide, this Mortgage shall not become or be, or be required to become or be, a Lien upon any of the properties acquired by the Company in or as a result of such transaction or any improvements, extensions or additions to such properties or any renewals, replacements or substitutions of or for any part or parts thereof.

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SECTION 1206.

TRANSFER OF LESS THAN SUBSTANTIALLY ALL.

This Article is not intended to limit the Company’s conveyances, transfers or leases of less than the entirety or substantially the entirety of its Gas Utility Property.

ARTICLE THIRTE

SUPPLEMENTAL MORTGAGES

SECTION 1301.

SUPPLEMENTAL MORTGAGES WITHOUT CONSENT OF HOLDERS.

Without the consent of any Holders, the Company and the Trustee, at any time and from time to time, may enter into one or more Mortgages supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:

(a)

to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities all as provided in Article Twelve; or

(b)

to add one or more covenants of the Company or other provisions for the benefit of the Holders of all or any series of Securities, or any Tranche, thereof or to surrender any right or power herein conferred upon the Company (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series); or

(c)

to add any additional Events of Default with respect to all or any series of Securities Outstanding hereunder (and if such additional Events of Default are to be for the benefit of less than all series of Securities, stating that such additional Events of Default are expressly being included solely for the benefit of such series); or

(d)

to change or eliminate any provision of this Mortgage or to add any new provision to this Mortgage; provided, however, that if such change, elimination or addition shall adversely affect the interests of the Holders of Securities of any series or Tranche Outstanding on the date of such supplemental Mortgage in any material respect, such change, elimination or addition shall become effective with respect to such series or Tranche only pursuant to the provisions of Section 1302 hereof or when no Security of such series or Tranche remains Outstanding; or

(e)

to provide additional collateral security for the Securities of any series; or

(f)

to establish the form or terms of Securities of any series or Tranche as contemplated by Sections 201 and 301; or

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(g)

to provide for the authentication and delivery of bearer Securities and coupons appertaining thereto representing interest, if any, thereon and for the procedures for the registration, exchange and replacement thereof and for the giving of notice to, and the solicitation of the vote or consent of, the holders thereof, and for any and all other matters incidental thereto; or

(h)

to evidence and provide for the acceptance of appointment hereunder by a separate or successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Mortgage as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 1011(b); or

(i)

to provide for the procedures required to permit the Company to utilize, at its option, a non-certificated system of registration for all, or any series or Tranche of, the Securities; or

(j)

to change any place or places where (1) the principal of and premium, if any, and interest, if any, on all or any series of Securities, or any Tranche thereof, shall be payable, provided however that, prior to the Second Effective Date, no such Mortgage supplemental hereto shall change such place or places without the consent of the Holder of each Outstanding Security affected thereby, (2) all or any series of Securities, or any Tranche thereof, may be surrendered for registration of transfer, (3) all or any series of Securities, or any Tranche thereof, may be surrendered for exchange and (4) notices and demands to or upon the Company in respect of all or any series of Securities, or any Tranche thereof, and this Mortgage may be served;

(k)

to amend and restate this Mortgage, as originally executed and delivered and as it may have been subsequently amended, in its entirety, but with such additions, deletions and other changes as shall not adversely affect the interests of the Holders of the Securities in any material respect; or

(l)

to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other changes to the provisions hereof or to add other provisions with respect to matters or questions arising under this Mortgage, provided that such other changes or additions shall not materially adversely affect the interests of the Holders of Securities of any series or Tranche in any material respect.

Without limiting the generality of the foregoing, if the Trust Indenture Act as in effect at the First Effective Date or at any time thereafter shall be amended and

(x)

if any such amendment shall require one or more changes to any provisions hereof or the inclusion herein of any additional provisions, or shall by operation of law be deemed to effect such changes or incorporate such provisions by reference or otherwise, this Mortgage shall be deemed to have been amended so as to conform to such amendment to the Trust Indenture Act, and the Company and the Trustee may, without the

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consent of any Holders, enter into an Mortgage supplemental hereto to evidence such amendment hereof; or

(y)

if any such amendment shall permit one or more changes to, or the elimination of, any provisions hereof which, at the First Effective Date or at any time thereafter, are required by the Trust Indenture Act to be contained herein or are contained herein to reflect any provision of the Trust Indenture Act as in effect at such date, this Mortgage shall be deemed to have been amended to effect such changes or elimination, and the Company and the Trustee may, without the consent of any Holders, enter into an Mortgage supplemental hereto to this Mortgage to effect such changes or elimination or evidence such amendment.

SECTION 1302.

SUPPLEMENTAL MORTGAGES WITH CONSENT OF HOLDERS.

Subsection (a) of this Section 1302 shall be in full force and effect on and after the First Effective Date and shall automatically cease to be of any further force or effect on and after the Second Effective Date.  Subsection (b) of this Section 1302 shall be of no force or effect until the Second Effective Date, but shall automatically become and be in full force and effect on and after the Second Effective Date.

(a) With the consent of the Holders of not less than a majority in principal amount of the Securities of all series then Outstanding affected by such supplemental indenture, by Act of such Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Mortgage or of modifying in any manner the rights of the Holders of the Securities under this Mortgage; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby

(i)

change the Stated Maturity of the principal of, or any installment of interest on, any Security, or reduce the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change any Place of Payment where, or the coin or currency in which, any Security, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); or

(ii) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver provided for in this Mortgage of compliance with certain provisions of this Mortgage or certain defaults hereunder and their consequences; or

(iii) modify or alter the provisions of the last proviso to the definition of the term "Outstanding;” or

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(iv) modify any of the provisions of this Section or Section 913, except to increase any percentage provided thereby or to provide that certain other provisions of this Mortgage cannot be modified or waived without the consent of the Holder of each Security affected thereby; or

(v) modify, in the case of Securities of any series convertible into other securities, any of the provisions of this Mortgage in such manner as to affect the conversion rights of the Holders of such Securities; or

(vi) permit the creation of any lien ranking prior to or on a parity with the lien of this Mortgage with respect to any of the Mortgaged Property or terminate the lien of this Mortgage on any property at any time subject hereto or deprive the Holder of any Security of the security afforded by the lien of this Mortgage; or

(vii) modify, in the case of Securities of any series for which a mandatory sinking fund is provided, any of the provisions of this Mortgage in such manner as to affect the rights of the Holders of such Securities to the benefits of such sinking fund.

The Trustee may in its discretion determine whether or not any Securities would be affected by any supplemental indenture and any such determination shall be conclusive upon the Holder of all Securities, whether theretofore or thereafter authenticated and delivered hereunder.  The Trustee shall not be liable for any such determination made in good faith.

It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

(b) On and after the Second Effective Date, subject to the provisions of Section 1301, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding under this Mortgage, considered as one class, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into a Mortgage or Mortgages supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Mortgage or modifying in any manner the rights of the Holders of Securities of any series under this Mortgage; provided, however, that if there shall be Securities of more than one series Outstanding hereunder and if a proposed Mortgage supplemental hereto shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such series, then the consent only of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of all series so directly affected, considered as one class, shall be required; and provided, further, that if the Securities of any series shall have been issued in more than one Tranche and if the proposed supplemental Mortgage shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such Tranches, then the consent only of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of all Tranches so directly affected, considered as one class, shall

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be required; and provided, further, that no such supplemental Mortgage shall, without the consent of the Holder of each Outstanding Security of each series or Tranche so directly affected,

(i)

change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security (other than pursuant to the terms thereof), or reduce the principal amount thereof or the rate of interest thereon (or the amount of any installment of interest thereon) or change the method of calculating such rate or reduce any premium payable upon the redemption thereof, or reduce the amount of the principal of a Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 902, or change the coin or currency (or other property), in which any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date);

(ii)

except as contemplated by Section 1601(b) or Section 1612, deprive such Holder of the benefit of the security of the Lien of this Mortgage; provided that, such consent of the Holders of each Outstanding Security of each series or Tranche so directly affected shall not be required with respect to any Mortgage supplemental hereto that releases one or more properties from the lien of the Mortgage if the lesser of the aggregate Cost or aggregate Fair Value of all properties to be released and theretofore released without the consent of the Holders pursuant to this Section 1302(b) is not greater than 10% of the lesser of the aggregate Cost or aggregate Fair Value of the Mortgaged Property as of the end of the calendar year in which the Second Effective Date occurs.  Prior to executing any such supplemental indenture, there shall be delivered to the Trustee (x) an Officers’ Certificate stating that, to the knowledge of the si gners, no Event of Default has occurred and is continuing and (y) an Experts’ Certificate stating, in the judgment of the signers, the aggregate Fair Value of the property to be released and theretofore released without the consent of the Holders pursuant to this Section 1302(b) since the Second Effective Date is not greater than 10% of the aggregate Fair Value of the Mortgaged Property as of the end of the calendar year in which the Second Effective Date occurs;

(iii)

reduce the percentage in principal amount of the Outstanding Securities of any series or any Tranche thereof, the consent of the Holders of which is required for any such supplemental Mortgage, or the consent of the Holders of which is required for any waiver of compliance with any provision of this Mortgage or of any default hereunder and its consequences, or reduce the requirements of Section 1404 for quorum or voting; or

(iv)

modify any of the provisions of this Section, Section 706 or Section 913 with respect to the Securities of any series, or any Tranche thereof, except to increase the percentages in principal amount referred to in this Section or such other Sections or to provide that other provisions of this Mortgage cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to “the Trustee” and concomitant changes in this Section, or the

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deletion of this proviso, in accordance with the requirements of Sections 1011(b), 1014 and 1301(h).

A supplemental Mortgage which (x) changes or eliminates any covenant or other provision of this Mortgage which has expressly been included solely for the benefit of the Holders of, or which is to remain in effect only so long as there shall be Outstanding, Securities of one or more particular series, or one or more Tranches thereof, or (y) modifies the rights of the Holders of Securities of such series or Tranches with respect to such covenant or other provision, shall be deemed not to affect the rights under this Mortgage of the Holders of Securities of any other series or Tranche.

It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental Mortgage, but it shall be sufficient if such Act shall approve the substance thereof.

Anything in this Mortgage to the contrary notwithstanding, if the Officers’ Certificate, supplemental Mortgage or Board Resolution, as the case may be, establishing the Securities of any series or Tranche shall provide that the Company may make certain specified additions, changes or eliminations to or from the Mortgage which shall be specified in such Officers’ Certificate, supplemental Mortgage or Board Resolution establishing such series or Tranche, (a) the Holders of Securities of such series or Tranche shall be deemed to have consented to a supplemental Mortgage containing such additions, changes or eliminations to or from the Mortgage which shall be specified in such Officers’ Certificate, supplemental Mortgage or Board Resolution establishing such series or Tranche, (b) no Act of such Holders shall be required to evidence such consent and (c) such consent may be counted in the determination of whether or not the Holders of the requisite principal amount of Securities shall have consented to such supplemental Mortgage.

SECTION 1303.

EXECUTION OF SUPPLEMENTAL MORTGAGES.

In executing, or accepting the additional trusts created by, any supplemental Mortgage permitted by this Article or the modifications thereby of the trusts created by this Mortgage, the Trustee shall be entitled to receive, and (subject to Section 1001) shall be fully protected in relying upon, an Opinion of Counsel and an Officers’ Certificate stating that the execution of such supplemental Mortgage is authorized or permitted by this Mortgage and containing the statements required by Section 103.  The Trustee may, but shall not be obligated to, enter into any such supplemental Mortgage which adversely affects the Trustee’s own rights, duties, immunities or liabilities under this Mortgage or otherwise.

SECTION 1304.

EFFECT OF SUPPLEMENTAL MORTGAGES.

Upon the execution of any supplemental Mortgage under this Article this Mortgage shall be modified in accordance therewith, and such supplemental Mortgage shall form a part of this Mortgage for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.  Any

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supplemental Mortgage permitted by this Article may restate this Mortgage in its entirety, and, upon the execution and delivery thereof, any such restatement shall supersede this Mortgage as theretofore in effect for all purposes.

SECTION 1305.

CONFORMITY WITH TRUST INDENTURE ACT.

Every supplemental Mortgage executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.

SECTION 1306.

REFERENCE IN SECURITIES TO SUPPLEMENTAL MORTGAGES.

Securities of any series, or any Tranche thereof, authenticated and delivered after the execution of any supplemental Mortgage pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental Mortgage.  If the Company shall so determine, new Securities of any series, or any Tranche thereof, so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental Mortgage may be prepared and executed by the Company, and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series or Tranche.

SECTION 1307.

MODIFICATION WITHOUT SUPPLEMENTAL MORTGAGE.

To the extent, if any, that the terms of any particular series of Securities shall have been established in or pursuant to a Board Resolution or an Officers’ Certificate pursuant to a supplemental Mortgage or Board Resolution as contemplated by Section 301, and not in an Mortgage supplemental hereto, additions to, changes in or the elimination of any of such terms may be effected by means of a supplemental Board Resolution or Officers’ Certificate pursuant to a Board Resolution or a supplemental Mortgage and complying with the requirements of Section 104, as the case may be, delivered to, and accepted by, the Trustee in writing; provided, however, that such supplemental Board Resolution or Officers’ Certificate shall not be accepted by the Trustee or otherwise be effective unless all conditions set forth in this Mortgage which would be required to be satisfied if such additions, changes or elimination w ere contained in a supplemental Mortgage shall have been appropriately satisfied.  Upon the written acceptance thereof by the Trustee, any such supplemental Board Resolution or Officers’ Certificate shall be deemed to be effective and constitute part of the Mortgage and a supplemental Mortgage hereunder, including for purposes of Section 1614.  Such acceptance shall be conveyed by a written instrument signed by a Responsible Officer of the Trustee.

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ARTICLE FOURTEÞÞÞ

MEETINGS OF HOLDERS; ACTION WITHOUT MEETING

SECTION 1401.

PURPOSES FOR WHICH MEETINGS MAY BE CALLED.

A meeting of Holders of Securities of one or more, or all, series, or any Tranche or Tranches thereof, may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Mortgage to be made, given or taken by Holders of Securities of such series or Tranches.

SECTION 1402.

CALL, NOTICE AND PLACE OF MEETINGS.

(a)

The Trustee may at any time call a meeting of Holders of Securities of one or more, or all, series, or any Tranche or Tranches thereof, for any purpose specified in Section 1401, to be held at such time and at such place as the Trustee shall determine with the approval of the Company.  Notice of every such meeting, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 107, not less than 21 nor more than 180 days prior to the date fixed for the meeting.

(b)

If the Trustee shall have been requested to call a meeting of the Holders of Securities of one or more, or all, series, or any Tranche or Tranches thereof, by the Company or by the Holders of 33% in aggregate principal amount of all of such series and Tranches, considered as one class, for any purpose specified in Section 1302, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have given the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities of such series and Tranches in the amount above specified, as the case may be, may determine the time and the place in the city in which the Corporate Trust Office is located, or in such other place as shall be determined or approved by the Company, for such meeting and m ay call such meeting for such purposes by giving notice thereof as provided in subsection (a) of this Section.

(c)

Any meeting of Holders of Securities of one or more, or all, series, or any Tranche or Tranches thereof, shall be valid without notice if the Holders of all Outstanding Securities of such series or Tranches are present in person or by proxy and if representatives of the Company and the Trustee are present, or if notice is waived in writing before or after the meeting by the Holders of all Outstanding Securities of such series, or any Tranche or Tranches thereof or by such of them as are not present at the meeting in person or by proxy, and by the Company and the Trustee.

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SECTION 1403.

PERSONS ENTITLED TO VOTE AT MEETINGS.

To be entitled to vote at any meeting of Holders of Securities of one or more, or all, series, or any Tranche or Tranches thereof, a Person shall be (a) a Holder of one or more Outstanding Securities of such series or Tranches, or (b) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series or Tranches by such Holder or Holders.  The only Persons who shall be entitled to attend any meeting of Holders of Securities of any series or Tranche shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

SECTION 1404.

QUORUM; ACTION.

The Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of the series and Tranches with respect to which a meeting shall have been called as hereinbefore provided, considered as one class, shall constitute a quorum for a meeting of Holders of Securities of such series and Tranches; provided, however, that if any action is to be taken at such meeting which this Mortgage expressly provides may be taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of such series and Tranches, considered as one class, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series and Tranches, considered as one class, shall constitute a quorum.  In the absence of a quorum within one hour of the time appointed for any such meeting, the meeting shall, if conve ned at the request of Holders of Securities of such series and Tranches, be dissolved.  In any other case the meeting may be adjourned for such period as may be determined by the chairman of the meeting prior to the adjournment of such meeting.  In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for such period as may be determined by the chairman of the meeting prior to the adjournment of such adjourned meeting.  Except as provided by Section 1405(e), notice of the reconvening of any meeting adjourned for more than 30 days shall be given as provided in Section 1402(a) not less than ten days prior to the date on which the meeting is scheduled to be reconvened.  Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series and Tranches which shall constitute a quorum.

Except as limited by Section 1302, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted only by the affirmative vote of the Holders of a majority in aggregate principal amount of the Outstanding Securities of the series and Tranches with respect to which such meeting shall have been called, considered as one class; provided, however, that, except as so limited, any resolution with respect to any action which this Mortgage expressly provides may be taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of such series and Tranches, considered as one class, may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the

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Holders of such specified percentage in principal amount of the Outstanding Securities of such series and Tranches, considered as one class.

Any resolution passed or decision taken at any meeting of Holders of Securities duly held in accordance with this Section shall be binding on all the Holders of Securities of the series and Tranches with respect to which such meeting shall have been held, whether or not present or represented at the meeting.

SECTION 1405.

ATTENDANCE AT MEETINGS; DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT OF MEETINGS.

(a)

Attendance at meetings of Holders of Securities may be in person or by proxy; and, to the extent permitted by law, any such proxy shall remain in effect and be binding upon any future Holder of the Securities with respect to which it was given unless and until specifically revoked by the Holder or future Holder of such Securities before being voted.

(b)

Notwithstanding any other provisions of this Mortgage, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities in regard to proof of the holding of such Securities and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate.  Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 105 and the appointment of any proxy shall be proved in the manner specified in Section 105.  Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 105 or othe r proof.

(c)

The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders as provided in Section 1402(b), in which case the Company or the Holders of Securities of the series and Tranches calling the meeting, as the case may be, shall in like manner appoint a temporary chairman.  A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of all series and Tranches represented in person or by proxy at the meeting, considered as one class.

(d)

At any meeting each Holder or proxy shall be entitled to one vote for each $1,000 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding.  The chairman of the meeting shall have no right to vote, except as a Holder of a Security or proxy.

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(e)

Any meeting duly called pursuant to Section 1402 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of all series and Tranches represented at the meeting, considered as one class; and the meeting may be held as so adjourned without further notice.

SECTION 1406.

COUNTING VOTES AND RECORDING ACTION OF MEETINGS.

The vote upon any resolution submitted to any meeting of Holders shall be by written ballots on which shall be subscribed the signatures of the Holders or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities, of the series and Tranches with respect to which the meeting shall have been called, held or represented by them.  The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports of all votes cast at the meeting.  A record, in duplicate, of the proceedings of each meeting of Holders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 1402 and, if applicable, Section 1404.  Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company, and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.  Any record so signed and verified shall be conclusive evidence of the matters therein stated.

SECTION 1407.

ACTION WITHOUT MEETING.

In lieu of a vote of Holders at a meeting as hereinbefore contemplated in this Article, any request, demand, authorization, direction, notice, consent, waiver or other action may be made, given or taken by Holders by one or more written instruments as provided in Section 105.

ARTICLE FIFTEEÞÞÞ

IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS

SECTION 1501.

LIABILITY SOLELY CORPORATE.

No recourse shall be had for the payment of the principal of or premium, if any, or interest, if any, on any Securities or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under this Mortgage, against any incorporator, shareholder, member, limited partner, officer, manager or director, as such, past, present or future of the Company or of any predecessor or successor of the Company (either directly

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or through the Company or a predecessor or successor of the Company), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that this Mortgage and all the Securities are solely corporate obligations, and that no personal liability whatsoever shall attach to, or be incurred by, any incorporator, shareholder, member, limited partner, officer, manager or director, past, present or future, of the Company or of any predecessor or successor of the Company, either directly or indirectly through the Company or any predecessor or successor of the Company, because of the indebtedness hereby authorized or under or by reason of any of the obligations, covenants or agreements contained in this Mortgage or in any of the Securities or to be implied herefrom or therefrom, and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of this Mortgage and the issuance of the Securities.

ARTICLE SIXTEE

POSSESSION, USE AND RELEASE OF MORTGAGED PROPERTY

SECTION 1601.

QUIET ENJOYMENT; EXCEPTED PROPERTY AFTER SECOND EFFECTIVE DATE.

(a)

Unless one or more Events of Default shall have occurred and be continuing, the Company shall be permitted to (i) possess, use and enjoy the Mortgaged Property (except, to the extent not herein otherwise provided, such cash and securities as are expressly required to be deposited with the Trustee); (ii) receive and use all tolls, rents, revenues, earnings, interest, dividends, royalties, issues, income and profits thereof; (iii) purchase, transmit, distribute, store, sell and otherwise deal with and use electricity, gas, water, electric and gas appliances and other products; (iv) use and consume stock in trade, materials and supplies; (v) deal with choses in action (other than pledged securities), leases and contracts and exercise, release or amend the rights and powers conferred upon it thereby; and (vi) alter, repair, maintain, replace, reconstruct, relocate, remove and operate any of its buildings, plants, stations, structures , transmission lines, distribution lines, pipe lines, conduits, mains, machinery, equipment, tools, dams, reservoirs and other real property and tangible personal property, except that none of such real property or tangible personal property may be relocated or removed so as to impair the lien of the Mortgage thereon unless such property is sold, abandoned or otherwise disposed of as permitted by this Section or by Section 1602 or released by the Trustee.  

(b)

On and after the Second Effective Date, then, unless an Event of Default shall have happened and be continuing, upon application by the Company and receipt of an Officers’ Certificate dated the date of said application, stating that, to the knowledge of the signers, no Event of Default has occurred and is continuing, the Trustee shall execute and deliver to the Company appropriate instruments releasing, to the extent not heretofore released and to the extent hereinbelow provided, the interest, if any, of the Trustee in all right, title and interest of the Company then owned or thereafter acquired in and to the property described in clause (B) of the definition of the term “Excepted Property” set forth in Section 101, whereupon the definition of the term “Excepted Property” set forth in such

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clause (B) shall automatically become and be in full force and effect and the definition of the term “Excepted Property” set forth in clause (A) of such definition shall automatically cease to be of any further force or effect.

SECTION 1602.

DISPOSITIONS WITHOUT RELEASE.

Unless an Event of Default shall have occurred and be continuing, the Company may at any time and from time to time, without any release or consent by, or report to, the Trustee:

(a)

Sell or otherwise dispose of, free from the Lien of this Mortgage, any machinery, equipment, apparatus, towers, transformers, poles, lines, cables, conduits, ducts, conductors, meters, regulators, holders, tanks, retorts, purifiers, odorizers, scrubbers, compressors, valves, pumps, mains, pipes, service pipes, fittings, connections, services, tools, implements, or any other fixtures or personality, then subject to the Lien hereof, which shall have become old, inadequate, obsolete, worn out, unfit, unadapted, unserviceable, undesirable or unnecessary for use in the operations of the Company upon replacing the same by, or substituting for the same, similar or analogous property, or other property performing a similar or analogous function or otherwise obviating the need therefor, having a Fair Value to the Company at least equal to that of the property sold or otherwise disposed of and subject to the Lien hereof, subject to no Lien s prior hereto except Permitted Liens and any other Liens to which the property sold or otherwise disposed of was subject;

(b)

Cancel or make changes or alterations in or substitutions for any and all easements, servitudes, rights-of-way and similar rights and/or interests, if, in the opinion of the Company, the value and utility generally of all its properties as an entirety and the security for the Securities will not thereby be impaired;

(c)

Grant, free from the Lien of this Mortgage, easements, ground leases or rights-of-way in, upon, over and/or across the property or rights-of-way of the Company for the purpose of roads, pipe lines, transmission lines, distribution lines, communication lines, railways, removal or transportation of coal, lignite, gas, oil or other minerals or timber, and other like purposes, or for the joint or common use of real property, rights-of-way, facilities and/or equipment; provided, however, that such grant shall not materially impair the use of the property or rights-of-way for the purposes for which such property or rights-of-way are held by the Company if, in the opinion of the Company, the value and utility generally of all its properties as an entirety and the security for the Securities will not thereby be impaired;

(d)

Abandon any property, if in the opinion of the Company (i) the abandonment of such property is desirable in the proper conduct of the business and in the operation of the properties of the Company or is otherwise in the best interests of the Company, and (ii) the value and utility generally of all its properties as an entirety and the security for the Securities will not thereby be impaired;

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(e)

Sell, surrender, release, abandon or otherwise dispose of, either with or without consideration (provided any consideration received by the Company shall, subject to the provisions of Section 1603, be paid over to the Trustee to be held by it as part of the Mortgaged Property), any easements, rights-of-way, leases, licenses, authority or permits over private property for towers, poles, wires, cables, conduits, pipe lines or mains, or for transmission line or distribution line purposes, if such towers, poles, wires, cables, conduits, pipe lines or mains, or such transmission or distribution lines, have theretofore been sold by the Company or removed by the Company to other property or taken by any municipality or other governmental subdivision by the exercise of a power of eminent domain or similar right or power, and if in the opinion of the Company the value and utility generally of all its properties as an entirety and the secu rity for the Securities will not thereby be impaired; and

(f)

Grant, free from the lien of this Mortgage, either with or without consideration (provided any consideration received by the Company shall, subject to the provisions of Section 1603, be paid over to the Trustee to be held by it as part of the Mortgaged Property), easements, rights-of-way, leases, licenses, authority or permits, for fixed periods of time or in perpetuity, over or with respect to any of the real property constituting part of the Mortgaged Property, if in the opinion of the Company (i) the granting of such easements, rights-of-way, leases, licenses, authority or permits does not substantially impair the continued use and enjoyment by the Company of the real property over or in respect of which such easements, rights-of-way, leases, licenses, authority or permits are granted for the purpose for which such property is used by the Company, and (ii) the value and utility generally of all its properties as an entirety an d the security for the Securities will not thereby be impaired.

SECTION 1603.

RELEASE OF MORTGAGED PROPERTY.

Unless an Event of Default shall have occurred and be continuing, the Company may obtain the release of any part of the Mortgaged Property, or any interest therein, other than cash held by the Trustee, and the Trustee shall release all its right, title and interest in and to the same from the Lien hereof, upon receipt by the Trustee of:

(a)

A Company Order requesting the release of such property and transmitting therewith a form of instrument or instruments to effect such release;

(b)

An Officers’ Certificate stating that, to the knowledge of the signers, no Event of Default has occurred and is continuing;

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(c)

An Experts’ Certificate made and dated not more than 90 days prior to the first day of the month in which such Company Order is delivered to the Trustee:

(i)

Describing the property to be released;

(ii)

Stating the Fair Value, in the judgment of the signers, of the property to be released;

(iii)

Stating the Cost of the property to be released (or, if the Fair Value to the Company of such property at the time such property was first included in an Experts’ Certificate was less than the Cost thereof, then such Fair Value, in lieu of Cost);

(iv)

Stating that, in the judgment of the signers, such release will not impair the security under this Mortgage in contravention of the provisions hereof;

(v)

Stating the aggregate principal amount of Securities and the aggregate principal amount of Secured Debt Outstanding on the date of such Experts’ Certificate; and

(vi)

Stating that, after giving effect to the transactions contemplated thereby, including payment, from the proceeds thereof, of any taxes and expenses incidental to any sale, exchange, dedication or other disposition of the property to be released, the Company would be permitted by the provisions of Section 401(a) to have authenticated and delivered at least $1.00 of additional Securities;

(d)

The amount in cash, if any, then required to be deposited with the Trustee in order to permit the Company to meet the requirement of clause (c)(vi) above; and

(e)

An Opinion of Counsel to the effect that:

(i)

this Mortgage constitutes, or, upon the delivery of, and/or the filing and/or recording in the proper places and manner of, the instruments of conveyance, assignment or transfer, if any, specified in said opinion, will constitute, a direct first mortgage lien, subject only to Permitted Liens, state environmental “super lien” laws and specified Prior Liens, upon the interest of the Company in the Property Additions; provided, however, that on and after the Second Effective Date, said opinion may also contain an exception for all Prior Liens; and

(ii)

the Company has corporate authority to operate such Property Additions.   

If (a) any property to be released from the Lien of this Mortgage under any provision of this Article (other than Section 1607) is subject to a Lien prior to the Lien hereof and is to be sold, exchanged, dedicated or otherwise disposed of subject to such Prior Lien and (b) after such release, such Prior Lien will not be a Lien on any property subject to the Lien hereof, then the Fair Value of such property to be released shall be

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deemed, for all purposes of this Mortgage, to be the value thereof unencumbered by such Prior Lien less the principal amount of the indebtedness secured by such Prior Lien.

Any cash deposited with the Trustee pursuant to the provisions of this Section 1603 shall be held as part of the Mortgaged Property and shall be withdrawn, released, used or applied in the manner, to the extent and for the purposes, and subject to the conditions, provided in Section 1606.

The right of the Company, under the provisions of Section 1302(b)(ii) permitting the release of certain property, shall be separate and apart from, and in addition to, the rights of the Company under this Section and Section 1605.

SECTION 1604.

PRESERVATION OF LIEN.

The Company shall maintain and preserve the Lien of this Mortgage so long as any Securities shall remain Outstanding, subject, however, to the provisions of Article Thirteen and Article Sixteen.

SECTION 1605.

RELEASE OF MINOR PROPERTIES; EFFECTIVE TIME.

(a)

Subsection (b) of this Section 1605 shall be of no force or effect until the Second Effective Date, but shall automatically become and be in full force and effect on and after the Second Effective Date;

(b)

Notwithstanding the provisions of Section 1603, unless an Event of Default shall have occurred and be continuing, the Company may obtain the release from the Lien hereof of any part of the Mortgaged Property, or any interest therein, and the Trustee shall whenever from time to time requested by the Company in a Company Order transmitting therewith a form of instrument or instruments to effect such release, and without requiring compliance with any of the provisions of Section 1603, release from the Lien hereof all the right, title and interest of the Trustee in and to the same provided that the lesser of the aggregate Cost or the aggregate Fair Value of the property to be so released on any date in a given calendar year, together with all other property theretofore released pursuant to this Section 1605 in such calendar year, shall not exceed the greater of (A) $10,000,000 and (B) 3% of the sum of the aggregate principal amount o f all (i) Securities and (ii) Secured Debt then Outstanding.  Prior to the granting of any such release, there shall be delivered to the Trustee (x) an Officers’ Certificate stating that, to the knowledge of the signers, no Event of Default has occurred and is continuing and (y) an Experts’ Certificate stating, in the judgment of the signers, the Fair Value of the property to be released, the aggregate Fair Value of all other property theretofore released pursuant to this Section in such calendar year, and that, in the judgment of the signers, the release thereof will not impair the security under this Mortgage in contravention of the provisions hereof.  

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SECTION 1606.

WITHDRAWAL OR OTHER APPLICATION OF CASH.

Except as hereafter in this Section provided, unless an Event of Default shall have occurred and be continuing, any Available Cash held by the Trustee, and any other cash which is required to be withdrawn, used or applied as provided in this Section,

(a)

May be withdrawn from time to time by the Company upon receipt by the Trustee of:  (i) a Company Order requesting the withdrawal, use or application of such cash and transmitting appropriate instructions, (ii) an Officers’ Certificate stating that, to the knowledge of the signer, no Event of Default has occurred or is continuing; (iii) an Experts’ Certificate made and dated not more than 90 days prior to the first day of the month in which such Company Order is delivered to the Trustee stating the aggregate principal amount of Securities and the aggregate principal amount of Secured Debt, in each case Outstanding on the date of such Experts’ Certificate, and stating that, after giving effect to the transactions contemplated thereby, (A) the Company would be permitted by the provisions of Section 401(a) to have authenticated and delivered at least $1.00 of additional Securities or, (B) if Company cannot meet th is requirement, stating the lesser amount of such cash which could be so withdrawn, used or applied by the Company and still enable the Company to meet the requirements of subsection (A) of this clause (a) of Section 1606, which lesser amount may be so withdrawn; and (iv) an Opinion of Counsel to the effect that:  (1)  this Mortgage constitutes, or, upon the delivery of, and/or the filing and/or recording in the proper places and manner of, the instruments of conveyance, assignment or transfer, if any, specified in said opinion, will constitute, a direct first mortgage lien, subject only to Permitted Liens, environmental “super lien” laws and specified Prior Liens, upon the interest of the Company in the Property Additions; provided, however, that on and after the Second Effective Date, said opinion may also contain an exception for all Prior Liens; and (2) the Company has corporate authority to operate such Property Additions.

(b)

May, upon the request of the Company, be used by the Trustee for the purchase of Securities in the manner, at the time or times, in the amount or amounts, at the price or prices and otherwise as directed or approved by the Company, all subject to the limitations hereafter in this Section set forth; or

(c)

May, upon the request of the Company, be applied by the Trustee to the payment (or provision therefor pursuant to Article Eight) at Stated Maturity of any Securities or to the redemption (or similar provision therefor) of any Securities which are, by their terms, redeemable, in each case of such series as may be designated by the Company, any such redemption to be in the manner and as provided in Article Five, all subject to the limitations hereafter in this Section set forth.

Notwithstanding the generality of clauses (b) and (c) above, no cash to be applied pursuant to such clauses shall be applied to the payment of an amount in excess of the principal amount of any Securities to be purchased, paid or redeemed except to the extent that the aggregate principal amount of all Securities theretofore, and of all Securities then to be, purchased, paid or redeemed pursuant to such clauses is not less than the aggregate

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cost for principal of, premium, if any, and accrued interest, if any, on and brokerage commissions, if any, with respect to, such Securities.

SECTION 1607.

RELEASE OF PROPERTY TAKEN BY EMINENT DOMAIN, ETC.

Should any of the Mortgaged Property, or any interest therein, be taken by exercise of the power of eminent domain or be sold to an entity possessing the power of eminent domain under a threat to exercise the same, and should the Company elect not to obtain the release of such property pursuant to other provisions of this Article, the Trustee shall, upon request of the Company evidenced by a Company Order transmitting therewith a form of instrument or instruments to effect such release, release from the Lien hereof all its right, title and interest in and to the property so taken or sold (or with respect to an interest in property, subordinate the Lien hereof to such interest), upon receiving (a) an Opinion of Counsel to the effect that such property has been taken by exercise of the power of eminent domain or has been sold to an entity possessing the power of eminent domain under threat of an exercise of such power, (b) an Officers’ Certificate stating the amount of net proceeds received or to be received for such property so taken or sold, and the amount so stated shall be deemed to be the Fair Value of such property for the purpose of any notice to the Holders of Securities, (c) an Experts’ Certificate stating the Cost thereof (or, if the Fair Value to the Company of such portion of such property at the time the same was first included in an Experts’ Certificate was less than the Cost thereof, then such Fair Value, as so certified, in lieu of Cost) and (d) a deposit by the Company of an amount in cash equal to the Cost or Fair Value stated in the Experts’ Certificate delivered pursuant to clause (c) above; provided, however, that the amount required to be so deposited shall not exceed the portion of the net proceeds received or to be received for such property so taken or sold which is allocable on a pro-rata or other reasonable basis to such property; and provided, further, that no such deposit sh all be required to be made hereunder if the proceeds of such taking or sale shall, as indicated in an Officers’ Certificate delivered to the Trustee, have been deposited with the trustee or other holder of a Prior Lien.  Any cash deposited with the Trustee under this Section may, contemporaneously or thereafter, be withdrawn, used or applied in the manner, to the extent and for the purposes, and subject to the conditions, provided in Section 1606.

SECTION 1608.

SECURED DEBT.

(a)

The Company will cause all Secured Debt to be paid in accordance with its terms at or before the maturity thereof, and will duly and punctually perform all the conditions imposed upon it by any Prior Lien, and will not permit any default under any Prior Lien to occur or continue for the period of grace specified therein.  

(b)

Upon the cancellation and discharge of any Prior Lien, or upon the release in any other way of Secured Debt deposited with the trustee or other holder of any other Prior Lien, the Company will (subject to the requirements of any mortgage or other lien securing such Secured Debt) cause any Secured Debt held by the trustee or other holder of the Prior Lien so cancelled or discharged or any Secured Debt so released in any other way to be cancelled, provided that such Secured Debt may be deposited with the

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trustee or other holder of some other Prior Lien (upon the same property as that mortgaged or pledged to secure the Secured Debt so deposited) if required by the terms thereof.

The principal of and interest on any such Secured Debt held by the Trustee shall be paid to the Trustee as and when the same become payable.  The interest received by the Trustee on any such obligations shall be deemed not to constitute cash and shall be remitted to the Company; provided, however, that if an Event of Default shall have occurred and be continuing, such proceeds shall be held as part of the Mortgaged Property until such Event of Default shall have been cured or waived.

If any Secured Debt shall be deposited with the Trustee, the Trustee shall have and may exercise all the rights and powers of any owner of such Secured Debt and of all substitutions therefor and, without limiting the generality of the foregoing, may collect and receive all insurance moneys payable to it under any of the provisions thereof and apply the same in accordance with the provisions thereof, may consent to extensions thereof at a higher or lower rate of interest, may join in any plan or plans of voluntary or involuntary reorganization or readjustment or rearrangement and may accept and hold hereunder new obligations, stocks or other securities issued in exchange therefor under any such plan.  Any discretionary action which the Trustee may be entitled to take in connection with any such obligations or substitutions therefor shall be taken, so long as no Event of Default shall have occurred and be continuing, in accord ance with a Company Order, and, during the continuance of an Event of Default, in its own discretion.

Anything herein to the contrary notwithstanding, the Company may irrevocably waive all rights with respect to any Secured Debt held by the Trustee, and the proceeds of any such obligations, by delivery to the Trustee of a Company Order:

(x)

Specifying such obligations and stating that the Company thereby waives all rights to the proceeds thereof pursuant to this Section, and any other rights with respect thereto; and

(y)

Directing that the principal of such obligations be applied as provided in clause (c) in the first paragraph of Section 1606, specifying the Securities to be paid or redeemed or for the payment or redemption of which payment is to be made.

Following any such waiver, the interest on any such obligations shall be applied to the payment of interest, if any, on the Securities to be paid or redeemed or for the payment or redemption of which provision is to be made, as specified in the aforesaid Company Order, as and when such interest shall become due from time to time, and any excess funds remaining from time to time after such application shall be applied to the payment of interest on any other Securities as and when the same shall become due.  Pending any such application, the interest on such obligations shall be invested in Investment Securities as shall be selected by the Company and specified in written instructions delivered to the Trustee.  The principal of any such obligations shall be applied solely to the payment of principal of the Securities to be paid or redeemed or for the payment or redemption of which provision is to be made, as s pecified in the aforesaid Company Order.  Pending such application, the principal of such obligations shall be invested in Eligible Obligations as

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shall be selected by the Company and specified in written instructions delivered to the Trustee.  The obligation of the Company to pay the principal of such Securities when the same shall become due at maturity, shall be offset and reduced by the amount of the proceeds of such obligations then held, and to be applied, by the Trustee in accordance with this paragraph.  

SECTION 1609.

DISCLAIMER OR QUITCLAIM.

In case the Company has sold, exchanged, dedicated or otherwise disposed of, or has agreed or intends to sell, exchange, dedicate or otherwise dispose of, or a Governmental Authority has ordered the Company to divest itself of, any Excepted Property or any other property not subject to the Lien hereof, or the Company desires to disclaim or quitclaim title to property to which the Company does not purport to have title, the Trustee shall, from time to time, disclaim or quitclaim such property upon receipt by the Trustee of the following:

(a)

A Company Order requesting such disclaimer or quitclaim and transmitting therewith a form of instrument to effect such disclaimer or quitclaim;

(b)

An Officers’ Certificate describing the property to be disclaimed or quitclaimed; and

(c)

An Opinion of Counsel stating the signer’s opinion that such property is not subject to the Lien hereof or required to be subject thereto by any of the provisions hereof and complying with the requirements of Section 103 of this Mortgage.

SECTION 1610.

MISCELLANEOUS.

(a)

The Experts’ Certificate as to the Fair Value of property to be released from the Lien of this Mortgage in accordance with any provision of this Article, and as to the nonimpairment, by reason of such release, of the security under this Mortgage in contravention of the provisions hereof, shall be made by an Independent Expert if the Fair Value of such property and of all other property released since the commencement of the then current calendar year, as set forth in the certificates required by this Mortgage, is 10% or more of the aggregate principal amount of all Securities then Outstanding; but such Experts’ Certificate shall not be required to be made by an Independent Expert in the case of any release of property if the Fair Value thereof, as set forth in the certificates required by this Mortgage, is less than $25,000 or less than 1% of the aggregate principal amount of all Securities then Outstanding. To the exte nt that the Fair Value of any property to be released from the Lien of this Mortgage shall be stated in an Independent Experts’ Certificate, such Fair Value shall not be required to be stated in any other Experts’ Certificate delivered in connection with such release.

(b)

No release of property from the Lien of this Mortgage effected in accordance with the provisions, and in compliance with the conditions, set forth in this Article and in Sections 103 and 104 shall be deemed to impair the security of this Mortgage in contravention of any provision hereof.

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(c)

If the Mortgaged Property shall be in the possession of a receiver or trustee, lawfully appointed, the powers hereinbefore conferred upon the Company with respect to the release of any part of the Mortgaged Property or any interest therein or the withdrawal of cash may be exercised, with the approval of the Trustee, by such receiver or trustee, notwithstanding that an Event of Default may have occurred and be continuing, and any request, certificate, appointment or approval made or signed by such receiver or trustee for such purposes shall be as effective as if made by the Company or any of its officers or appointees in the manner herein provided; and if the Trustee shall be in possession of the Mortgaged Property under any provision of this Mortgage, then such powers may be exercised by the Trustee in its discretion notwithstanding that an Event of Default may have occurred and be continuing.

(d)

If the Company shall retain any interest in any property released from the Lien of this Mortgage as provided in Section 1603 or 1605, this Mortgage shall not become or be, or be required to become or be, a Lien upon such property or such interest therein or any improvements, extensions or additions to such property or renewals, replacements or substitutions of or for such property or any part or parts thereof unless the Company shall execute and deliver to the Trustee an Mortgage supplemental hereto, in recordable form, containing a grant, conveyance, transfer and mortgage thereof.  As used in this subsection, the terms “improvements”, “extensions” and “additions” shall be limited as set forth in Section 1201.

(e)

Notwithstanding the occurrence and continuance of an Event of Default, the Trustee, in its discretion, may release from the Lien hereof any part of the Mortgaged Property or permit the withdrawal of cash, upon compliance with the other conditions specified in this Article in respect thereof.

(f)

No purchaser or grantee of property purporting to have been released hereunder shall be bound to ascertain the authority of the Trustee to execute the instrument or instruments of release, or to inquire as to any facts required by the provisions hereof for the exercise of such authority; nor shall any purchaser or grantee of any property or rights permitted by this Article to be sold, granted, exchanged, dedicated or otherwise disposed of, be under obligation to ascertain or inquire into the authority of the Company to make any such sale, grant, exchange, dedication or other disposition.

SECTION 1611.

MAINTENANCE OF PROPERTIES.

The Company shall cause (or, with respect to property owned in common with others, make reasonable effort to cause) the Mortgaged Property, considered as a whole, to be maintained and kept in good condition, repair and working order and shall cause (or, with respect to property owned in common with others, make reasonable effort to cause) to be made such repairs, renewals, replacements, betterments and improvements thereof, as, in the judgment of the Company, may be necessary in order that the operation of the Mortgaged Property, considered as a whole, may be conducted in accordance with common industry practice; provided, however, that nothing in this Section shall prevent the Company from discontinuing, or causing the discontinuance of, the operation and maintenance of any portion of the Mortgaged Property if such discontinuance is in the

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judgment of the Company desirable in the conduct of its business; and provided, further, that nothing in this Section shall prevent the Company from selling, transferring or otherwise disposing of, or causing the sale, transfer or other disposition of, any portion of the Mortgaged Property in compliance with the other Articles of this Mortgage.

SECTION 1612.

PAYMENT OF TAXES; DISCHARGE OF LIENS.

The Company shall pay all taxes and assessments and other governmental charges lawfully levied or assessed upon the Mortgaged Property, or upon any part thereof, or upon the interest of the Trustee in the Mortgaged Property, before the same shall become delinquent, and shall observe and conform in all material respects to all valid requirements of any Governmental Authority relative to the Mortgaged Property and all covenants, terms and conditions upon or under which any of the Mortgaged Property is held; and the Company shall not voluntarily suffer any Lien to be created upon the Mortgaged Property, or any part thereof, prior to or on a parity with the Lien hereof, other than (a) Permitted Liens and, on and after the Second Effective Date (but not before), Prior Liens, (b) in the case of property acquired prior to the Second Effective Date, so long as no Event of Default sha ll exist at such time, (x) Purchase Money Liens, provided, that (i) the principal amount of the indebtedness secured by such Purchase Money Lien shall not exceed 66 2/3% of the cost or fair value to the Company at the time of the acquisition thereof by the Company, whichever is less, of the property subject thereto, as determined by the Board of Directors, (ii) the aggregate principal amount of all indebtedness of the Company at the time outstanding secured by Purchase Money Liens (including modifications, extensions, renewals and replacements thereof, and also the indebtedness then being incurred, as permitted by the following clause (y)) and all Sale and Leaseback Transactions shall not exceed 20% of the aggregate principal amount of all Securities then Outstanding, and (iii) each such Purchase Money Lien shall apply only to the property originally subject thereto and fixed improvements erected on such real property or affixed to such personal property or equipment used in connection with such re al or personal property, and (y) any modifications, extensions, renewals or replacements of the Purchase Money Liens permitted by the preceding clause (x) upon the same property theretofore subject thereto (and no other property) or modifications, extensions, renewals or replacements of the indebtedness secured thereby provided that in any such case the principal amount of such indebtedness so modified, replaced, extended or renewed shall not be increased, and (c) in the case of property acquired on or after the Second Effective Date, Purchase Money Liens and any other Liens existing or placed thereon at the time of the acquisition thereof (including, but not limited to, the Lien of any Prior Lien);

provided, however, that nothing contained in this Section shall require the Company (i) to observe or conform to any requirement of Governmental Authority or to cause to be paid or discharged, or to make provision for, any such Lien, or to pay any such tax, assessment or governmental charge so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings, (ii) to pay, discharge or make provisions for any tax, assessment or other governmental charge, the validity of which shall not be so contested if adequate security for the payment of such tax, assessment or other governmental charge and for any penalties or interest which may reasonably be anticipated from failure to pay the same shall be given to the Trustee or (iii) to pay, discharge or make provisions for any

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Liens existing on the Mortgaged Property at the First Effective Date; and provided, further, that nothing in this Section shall prohibit the issuance or other incurrence of additional indebtedness, or the refunding of outstanding indebtedness, secured by any Lien prior to the Lien hereof which is permitted under this Section to continue to exist.

SECTION 1613.

INSURANCE.

(a)

The Company shall (i) keep or cause to be kept all the property subject to the Lien of this Mortgage insured against loss by fire, to the extent that property of similar character is usually so insured by companies similarly situated and operating like properties, to a reasonable amount, by reputable insurance companies, the proceeds of such insurance (except as to any particular loss less than the greater of (A) $10,000,000 and (B) 3% of the aggregate principal amount of all Securities and Secured Debt Outstanding on the date of such particular loss and, if such insurance also covers any Excepted Property, except as to any loss of such Excepted Property)  to be made payable, subject to applicable law, to the Trustee as the interest of the Trustee may appear, to the trustee of a Prior Lien, or to the trustee or other holder of any other Lien prior hereto upon property subject to the Lien hereof, if the terms thereof require such payment or (ii) in lieu of or supplementing such insurance in whole or in part, adopt some other method or plan of protection against loss by fire at least equal in protection to the method or plan of protection against loss by fire of companies similarly situated and operating properties subject to similar fire hazards or properties on which an equal primary fire insurance rate has been set by reputable insurance companies; and if the Company shall adopt such other method or plan of protection, it shall, subject to applicable law (and except as to any particular loss less than the greater of (x) $10,000,000 and (y) 3% of the aggregate principal amount of all Securities and Secured Debt Outstanding on the date of such particular loss and, if such other method or plan of protection also covers any Excepted Property, except as to any loss of such Excepted Property) pay to the Trustee on account of any loss covered by such method or plan an amount in cash equal to the amount of such loss less any amounts o therwise paid to the Trustee in respect of such loss or paid to the trustee under a Prior Lien or to the trustee or other holder of any other Lien prior hereto upon property subject to the Lien hereof in respect of such loss if the terms thereof require such payment.  Any cash so required to be paid by the Company pursuant to any such method or plan shall for the purposes of this Mortgage be deemed to be proceeds of insurance.  In case of the adoption of such other method or plan of protection, the Company shall furnish to the Trustee a certificate of an actuary or other qualified person appointed by the Company with respect to the adequacy of such method or plan.

Anything herein to the contrary notwithstanding, the Company may have fire insurance policies with (i) a deductible provision in a dollar amount per occurrence not exceeding the greater of (a) $10,000,000 and (b) 3% of the aggregate principal amount of all Securities and Secured Debt Outstanding on the date such policy goes into effect, and/or (ii) co-insurance or self insurance provisions with a dollar amount per occurrence not exceeding 30% of the loss proceeds otherwise payable; provided, however, that the dollar amount described in clause (i) above may be exceeded to the extent such dollar amount per occurrence is below the deductible amount in effect as to fire insurance (x) on property of similar character insured by companies similarly situated and operating like

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property or (y) on property as to which an equal primary fire insurance rate has been set by reputable insurance companies.

(b)

All moneys paid to the Trustee by the Company in accordance with this Section or received by the Trustee as proceeds of any insurance, in either case on account of a loss on or with respect to Mortgaged Property, shall, subject to the requirements of any Prior Lien or other Lien prior hereto upon property subject to the Lien hereof, be held by the Trustee and, subject as aforesaid, shall be paid by it to the Company to reimburse the Company for an equal amount expended or committed for expenditure in the rebuilding, renewal and/or replacement of or substitution for the property destroyed or damaged, upon receipt by the Trustee of:

(i)

A Company Request requesting such payment,

(ii)

An Experts’ Certificate:

(A)

Describing the property so damaged or destroyed;

(B)

Stating the Cost of such property (or, if the Fair Value to the Company of such property was first included in an Experts’ Certificate was less than the Cost thereof, then such Fair Value, as so certified, in lieu of Cost) or, if such damage or destruction shall have affected only a portion of such property, stating the allocable portion of such Cost or Fair Value;

(C)

Stating the amounts so expended or committed for expenditure in the rebuilding, renewal, replacement of and/or substitution for such property; and

(D)

Stating the Fair Value to the Company of such property as rebuilt or renewed or as to be rebuilt or renewed and/or of the replacement or substituted property, and if

(1)

Within 6 months prior to the date of acquisition thereof by the Company, such property has been used or operated, by a person or persons other than the Company, in a business similar to that in which it has been or is to be used or operated by the Company, and

(2)

The Fair Value to the Company of such property as set forth in such Experts’ Certificate is not less than $25,000 and not less than 1% of the aggregate principal amount of all Securities then Outstanding,

the Expert making the statement required by this clause (D) shall be an Independent Expert, and

(iii)

an Opinion of Counsel stating that, in the opinion of the signer, the property so rebuilt or renewed or to be rebuilt or renewed, and/or the replacement property, is or will be subject to the Lien hereof.

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Any such moneys not so applied within 36 months after its receipt by the Trustee, or in respect of which notice in writing of intention to apply the same to the work of rebuilding, renewal, replacement or substitution then in progress and uncompleted shall not have been given to the Trustee by the Company within such 36 months, or which the Company shall at any time notify the Trustee is not to be so applied, shall thereafter be withdrawn, used or applied in the manner, to the extent and for the purposes, and subject to the conditions, provided in Section 1606; provided, however, that if the amount of such moneys shall exceed the amount stated pursuant to clause (B) in the Experts’ Certificate referred to above, the amount of such excess shall not be subject to Section 1606 and shall be remitted to or upon the order of the Company upon the withdrawal, use or application of the balance of such moneys pursuant to Section 1606.  

(c)

Whenever under the provisions of this Section the Company is required to deliver moneys to the Trustee and at the same time shall have satisfied the conditions set forth herein for payment of moneys by the Trustee to the Company, there shall be paid to or retained by the Trustee or paid to the Company, as the case may be, only the net amount.

SECTION 1614.

RECORDING, FILING, ETC.

The Company shall cause this Mortgage and all Mortgages and instruments supplemental hereto (or notices, memoranda or financing statements as may be recorded or filed to place third parties on notice thereof) to be promptly recorded and filed and re-recorded and re-filed in such manner and in such places, as may be required by law in order fully to preserve and protect the security of the Holders of the Securities and all rights of the Trustee, and shall furnish to the Trustee:

(a)

Promptly after the execution and delivery of this Mortgage and of each Supplemental Mortgage, an Opinion of Counsel either stating that in the opinion of such counsel this Mortgage or such Supplemental Mortgage (or any other instrument, resolution, certificate, notice, memorandum or financing statement in connection therewith) has been properly recorded and filed, so as to make effective the Lien intended to be created hereby or thereby, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to make such Lien effective.  The Company shall be deemed to be in compliance with this subsection (a) if (i) the Opinion of Counsel herein required to be delivered to the Trustee shall state that this Mortgage or such Supplemental Mortgage, (or any other instrument, resolution, certificate notice, memorandum or financing statement in connection therewith) has been received for record or filing in each jurisdiction in which it is required to be recorded or filed and that, in the opinion of such counsel (if such is the case), such receipt for record or filing makes effective the Lien intended to be created by this Mortgage or such Supplemental Mortgage, and (ii) such opinion is delivered to the Trustee within such time, following the date of such Supplemental Mortgage, as shall be practicable having due regard to the number and distance of the jurisdictions in which this Mortgage or such Supplemental Mortgage (or such other instrument, resolution, certificate, notice, memorandum or financing statement in connection therewith) is required to be recorded or filed; and

112

(b)

On or before December 1 of each year, beginning the first calendar year after the occurrence of the First Effective Date, an Opinion of Counsel stating either (i) that in the opinion of such counsel such action has been taken, since the date of the most recent Opinion of Counsel furnished pursuant to this subsection (b) or the first Opinion of Counsel furnished pursuant to subsection (a) of this Section, with respect to the recording, filing, re-recording, and re-filing of this Mortgage and of each Supplemental Mortgage (or any other instrument, resolution, certificate, notice, memorandum or financing statement in connection therewith), as is necessary to maintain the effectiveness of the Lien hereof, and reciting such action, or (ii) that in the opinion of such counsel no such action is necessary to maintain the effectiveness of such Lien.

The Company shall execute and deliver such Supplemental Mortgage or Mortgages and such further instruments and do such further acts as may be necessary or proper to carry out the purposes of this Mortgage and to make subject to the Lien hereof any property hereafter acquired, made or constructed and intended to be subject to the Lien hereof, and to transfer to any new trustee or trustees or co-trustee or co-trustees, the estate, powers, instruments or funds held in trust hereunder.

SECTION 1615.

EFFECTIVE TIME FOR CERTAIN PROVISIONS

All provisions hereof shall, unless otherwise specified herein, or except as may be specified in the terms and conditions of any series or Tranche of Securities (in which case such terms and conditions of any such series or Tranche of Securities shall be applicable to such series or Tranche of Securities), be of full force and effect on and after the First Effective Date, except that the provisions of (i) the expanded definitions of Excepted Property and of Permitted Liens, and the second proviso to the definition of Outstanding, contained in Section 101, (ii) Sections 401(b)(v)(1), 1603(e)(i) and 1606(a) permitting the Opinion of Counsel to specify that the Mortgage may be subject to Prior Liens, (iii) Section  801(b) to the extent that it applies to Securities issued on or before [January 1, 2008], (iv) Section 1612 permitting the creation of Prior Liens on the Mortgaged Property, and (v) Se ctions 707, 802(b), 902(b), 913(b), 1301(j), 1302(b), 1601(b) 1605(b) and 1612, which are specified to be in effect only on and after the Second Effective Date shall, in each case, be of no force and effect prior to the Second Effective Date but shall automatically become of full force and effect on and after the Second Effective Date, all in accordance with the provisions of such Sections; and the definitions of Excepted Property and of Permitted Liens, the portion of the definition of Outstanding, and the provisions of Sections 801(a), 802(a), 902(a), 913(a), 1302(a) and 1612 which are specified to be in effect only prior to the Second Effective Date shall automatically cease to be of any further force or effect on and after the Second Effective Date.  

* * * * * * * * * * * * * * * * * * * *

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

113

(The testimonium clause, signatures and acknowledgments to the original Indenture of Mortgage and Deed of Trust have been omitted herein, but remain applicable hereto.)

114

EX-12

Northeast Utilities													Exhibit 12
Ratio of Earnings to Fixed Charges
		Three Months
(Thousands of Dollars)		Ended
		March 31, 2010		For the Years Ended December 31,
		(unaudited)		2009		2008		2007		2006		2005
Earnings, as defined:
Net income/(loss) from continuing operations
before cumulative effect of accounting change	$	87,601	$	335,592	$	266,387	$	251,455	$	138,495	$	(251,344)
Income tax expense/(benefit)		79,857		179,947		105,661		109,420		(76,326)		(184,862)
Equity in earnings of regional nuclear
generating and transmission companies		(290)		(1,762)		(1,637)		(3,983)		(334)		(3,311)
Dividends received from regional equity
investees		35		3,794		1,017		4,542		2,145		687
Fixed charges, as below		73,453		296,764		304,374		275,611		267,243		265,046
Less: Interest capitalized (including AFUDC)		(1,892)		(5,929)		(17,797)		(17,568)		(14,482)		(10,463)
Preferred dividend security requirements of
consolidated subsidiaries		(2,316)		(9,265)		(9,265)		(9,265)		(9,265)		(9,265)
Total earnings/(loss), as defined	$	236,448	$	799,141	$	648,740	$	610,212	$	307,476	$	(193,512)
Fixed charges, as defined:
Interest on long-term debt (a)	$	57,270	$	224,712	$	193,883	$	162,841	$	141,579	$	131,870
Interest on rate reduction bonds		6,690		36,524		50,231		61,580		74,242		87,439
Other interest (b)		3,302		12,401		25,031		15,824		22,375		19,276
Rental interest factor		1,983		7,933		8,167		8,533		5,300		6,733
Preferred dividend security requirements of
consolidated subsidiaries		2,316		9,265		9,265		9,265		9,265		9,265
Interest capitalized (including AFUDC)		1,892		5,929		17,797		17,568		14,482		10,463
Total fixed charges, as defined	$	73,453	$	296,764	$	304,374	$	275,611	$	267,243	$	265,046
Ratio of Earnings to Fixed Charges		3.22		2.69		2.13		2.21		1.15		(0.73)		(c)
(a) Interest on long-term debt amounts include amortized premiums, discounts and capitalized expenses related to indebtedness.
(b) For the three months ended March 31, 2010 and for the years ended December 31, 2009, 2008 and 2007, other interest includes interest related to accounting for uncertain tax positions.
(c) Consolidated earnings were inadequate to cover fixed charges by $458.6 million for the year ended December 31, 2005.

EX-15

Exhibit 15

May 7, 2010

Northeast Utilities

56 Prospect Street

Hartford, CT 06103

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of Northeast Utilities and subsidiaries for the periods ended March 31, 2010 and 2009, as indicated in our report dated May 7, 2010; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, is incorporated by reference in Registration Statement No. 333-165579 on Form S-3 and Registration Statement Nos. 333-63144, 333-121364 and 333-142724 on Form S-8.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/	Deloitte & Touche LLP
	Deloitte & Touche LLP

Hartford, Connecticut

EX-31

Exhibit 31

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles W. Shivery, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Northeast Utilities (the registrant);

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;

4.

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:

(a)

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;

(b)

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;

(c)

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

(d)

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):

(a)

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

(b)

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 7, 2010

/s/	Charles W. Shivery
	Charles W. Shivery
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David R. McHale, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Northeast Utilities (the registrant);

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;

4.

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:

(a)

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;

(b)

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;

(c)

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

(d)

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):

(a)

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

(b)

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 7, 2010

/s/	David R. McHale
	David R. McHale
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

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 Northeast Utilities (the registrant) on Form 10-Q for the period ending March 31, 2010 as filed with the Securities and Exchange Commission (the Report), we, Charles W. Shivery, Chairman, President and Chief Executive Officer of the registrant and David R. McHale, Executive Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the registrant.

/s/	Charles W. Shivery
	Charles W. Shivery
	Chairman, President and Chief Executive Officer

/s/	David R. McHale
	David R. McHale
	Executive Vice President and Chief Financial Officer

Date:  May 7, 2010

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-12

The Connecticut Light and Power Company												Exhibit 12
Ratio of Earnings to Fixed Charges
		Three Months
(Thousands of Dollars)		Ended
		March 31, 2010	For the Years Ended December 31,
		(unaudited)		2009		2008		2007		2006		2005
Earnings, as defined:
Net income	$	48,412	$	216,316	$	191,158	$	133,564	$	200,007	$	94,845
Income tax expense/(benefit)		43,493		118,847		77,852		52,353		(43,961)		32,174
Equity in (earnings)/losses of regional nuclear
generating companies		(35)		(282)		(366)		(1,901)		854		(1,153)
Dividends received from regional equity investees		-		1,520		-		2,596		1,407		412
Fixed charges, as below		40,690		163,887		165,170		155,557		131,923		133,321
Less: Interest capitalized (including AFUDC)		(696)		(2,203)		(12,991)		(10,924)		(6,610)		(6,719)
Total earnings, as defined	$	131,864	$	498,085	$	420,823	$	331,245	$	283,620	$	252,880
Fixed charges, as defined:
Interest on long-term debt (a)	$	33,632	$	133,422	$	104,954	$	84,292	$	64,873	$	59,019
Interest on rate reduction bonds		3,032		19,061		29,129		37,728		46,692		55,796
Other interest (b)		1,863		3,334		12,163		16,413		6,281		5,220
Rental interest factor		1,467		5,867		5,933		6,200		7,467		6,567
Interest capitalized (including AFUDC)		696		2,203		12,991		10,924		6,610		6,719
Total fixed charges, as defined	$	40,690	$	163,887	$	165,170	$	155,557	$	131,923	$	133,321
Ratio of Earnings to Fixed Charges		3.24		3.04		2.55		2.13		2.15		1.90
(a) Interest on long-term debt amounts include amortized premiums, discounts and capitalized expenses related to indebtedness.
(b) For the three months ended March 31, 2010 and for the years ended December 31, 2009, 2008 and 2007, other interest includes interest related to accounting for uncertain tax positions.

EX-31

Exhibit 31

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Leon J. Olivier, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of The Connecticut Light and Power Company (the registrant);

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;

4.

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:

(a)

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;

(b)

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;

(c)

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

(d)

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):

(a)

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

(b)

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 7, 2010

/s/	Leon J. Olivier
	Leon J. Olivier
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David R. McHale, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of The Connecticut Light and Power Company (the registrant);

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;

4.

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:

(a)

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;

(b)

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;

(c)

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

(d)

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):

(a)

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

(b)

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 7, 2010

/s/	David R. McHale
	David R. McHale
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

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 The Connecticut Light and Power Company (the registrant) on Form 10-Q for the period ending March 31, 2010 as filed with the Securities and Exchange Commission (the Report), we, Leon J. Olivier, Chief Executive Officer of the registrant and David R. McHale, Executive Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the registrant.

/s/	Leon J. Olivier
	Leon J. Olivier
	Chief Executive Officer

/s/	David R. McHale
	David R. McHale
	Executive Vice President and Chief Financial Officer

Date:  May 7, 2010

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-12

Public Service Company of New Hampshire												Exhibit 12
Ratio of Earnings to Fixed Charges
		Three Months
(Thousands of Dollars)		Ended
		March 31, 2010	For the Years Ended December 31,
		(unaudited)		2009		2008		2007		2006		2005
Earnings, as defined:
Net income	$	15,810	$	65,570	$	58,067	$	54,434	$	35,323	$	41,739
Income tax expense		14,116		31,990		21,996		22,794		39,183		12,234
Equity in (earnings)/losses of regional nuclear
generating companies		(6)		(50)		(62)		(343)		74		(230)
Dividends received from regional equity investees		-		220		-		521		367		172
Fixed charges, as below		13,987		51,227		54,597		50,637		50,092		49,751
Less: Interest capitalized (including AFUDC)		(1,175)		(3,138)		(2,967)		(2,985)		(2,768)		(1,896)
Total earnings, as defined	$	42,732	$	145,819	$	131,631	$	125,058	$	122,271	$	101,770
Fixed charges, as defined:
Interest on long-term debt (a)	$	9,512	$	33,045	$	32,655	$	26,029	$	24,100	$	20,481
Interest on rate reduction bonds		2,721		13,128		15,969		18,013		20,828		24,074
Other interest (b)		179		316		1,539		2,243		829		1,733
Rental interest factor		400		1,600		1,467		1,367		1,567		1,567
Interest capitalized (including AFUDC)		1,175		3,138		2,967		2,985		2,768		1,896
Total fixed charges, as defined	$	13,987	$	51,227	$	54,597	$	50,637	$	50,092	$	49,751
Ratio of Earnings to Fixed Charges		3.06		2.85		2.41		2.47		2.44		2.05
(a) Interest on long-term debt amounts include amortized premiums, discounts and capitalized expenses related to indebtedness.
(b) For the three months ended March 31, 2010 and for the year ended December 31, 2009, other interest includes interest related to accounting for uncertain tax positions.

EX-31

Exhibit 31

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Leon J. Olivier, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Public Service Company of New Hampshire (the registrant);

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;

4.

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:

(a)

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;

(b)

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;

(c)

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

(d)

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):

(a)

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

(b)

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 7, 2010

/s/	Leon J. Olivier
	Leon J. Olivier
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David R. McHale, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Public Service Company of New Hampshire (the registrant);

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;

4.

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:

(a)

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;

(b)

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;

(c)

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

(d)

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):

(a)

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

(b)

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 7, 2010

/s/	David R. McHale
	David R. McHale
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

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 Public Service Company of New Hampshire (the registrant) on Form 10-Q for the period ending March 31, 2010 as filed with the Securities and Exchange Commission (the Report), we, Leon J. Olivier, Chief Executive Officer of the registrant, and David R. McHale, Executive Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the registrant.

/s/	Leon J. Olivier
	Leon J. Olivier
	Chief Executive Officer

/s/	David R. McHale
	David R. McHale
	Executive Vice President and Chief Financial Officer

Date:  May 7, 2010

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-12

Western Massachusetts Electric Company											Exhibit 12
Ratio of Earnings to Fixed Charges
		Three Months
(Thousands of Dollars)		Ended
		March 31, 2010	For the Years Ended December 31,
		(unaudited)		2009		2008		2007		2006		2005
Earnings, as defined:
Net income	$	5,659	$	26,196	$	18,330	$	23,604	$	15,644	$	15,085
Income tax expense		6,446		14,923		10,545		14,586		7,766		9,294
Equity in (earnings)/losses of regional nuclear
generating companies		(9)		(78)		(101)		(526)		241		(311)
Dividends received from regional equity
investees		-		419		-		701		372		103
Fixed charges, as below		5,237		20,614		21,910		22,162		21,087		19,801
Less: Interest capitalized (including AFUDC)		(10)		(195)		(1,010)		(983)		(853)		(455)
Total earnings, as defined	$	17,323	$	61,879	$	49,674	$	59,544	$	44,257	$	43,517
Fixed charges, as defined:
Interest on long-term debt (a)	$	3,881	$	14,074	$	13,244	$	11,577	$	10,671	$	9,535
Interest on rate reduction bonds		937		4,335		5,133		5,839		6,723		7,570
Other interest (b)		126		877		1,256		2,430		1,507		1,041
Rental interest factor		283		1,133		1,267		1,333		1,333		1,200
Interest capitalized (including AFUDC)		10		195		1,010		983		853		455
Total fixed charges, as defined	$	5,237	$	20,614	$	21,910	$	22,162	$	21,087	$	19,801
Ratio of Earnings to Fixed Charges		3.31		3.00		2.27		2.69		2.10		2.20
(a) Interest on long-term debt amounts include amortized premiums, discounts and capitalized expenses related to indebtedness.
(b) For the three months ended March 31, 2010 and for the years ended December 31, 2009 and 2008, other interest includes interest related to accounting for uncertain tax positions.

EX-31

Exhibit 31

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Leon J. Olivier, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Western Massachusetts Electric Company (the registrant);

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;

4.

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:

(a)

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 subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

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;

(c)

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

(d)

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):

(a)

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

(b)

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 7, 2010

/s/	Leon J. Olivier
	Leon J. Olivier
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David R. McHale, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Western Massachusetts Electric Company (the registrant);

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;

4.

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:

(a)

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 subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

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;

(c)

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

(d)

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):

(a)

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

(b)

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 7, 2010

/s/	David R. McHale
	David R. McHale
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

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 Western Massachusetts Electric Company (the registrant) on Form 10-Q for the period ending March 31, 2010 as filed with the Securities and Exchange Commission (the Report), we, Leon J. Olivier, Chief Executive Officer of the registrant, and David R. McHale, Executive Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the registrant.

/s/	Leon J. Olivier
	Leon J. Olivier
	Chief Executive Officer

/s/	David R. McHale
	David R. McHale
	Executive Vice President and Chief Financial Officer

Date:  May 7, 2010

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.