In accordance with accounting guidance for share-based payments, share-based compensation awards are recorded using the fair value-based method at the date of grant. NU, CL&P, NSTAR Electric, PSNH and WMECO record compensation cost related to these awards, as applicable, for shares issued or sold to NU, CL&P, NSTAR Electric, PSNH and WMECO employees and officers, as well as the allocation of costs associated with shares issued or sold to NU's service companies' employees and officers that support CL&P, NSTAR Electric, PSNH and WMECO.

Upon consummation of the merger of NU and NSTAR, the NSTAR 1997 Share Incentive Plan and the NSTAR 2007 Long-Term Incentive Plan were assumed by NU. Share-based awards granted under the NSTAR Plans and held by NSTAR employees and officers were generally converted into outstanding NU share-based compensation awards with the estimated fair value of $53.2 million. Refer to Note 2, "Merger of NU and NSTAR," for further information regarding the merger transaction. Specifically, as of the merger closing, and as adjusted by the exchange ratio, (1) NU converted outstanding NSTAR stock options into 2,664,894 NU stock options valued at $30.5 million, (2) NU converted NSTAR Deferred Shares and NSTAR Performance Shares into 421,775 NU RSU's valued at $15.5 million, and (3) NU converted NSTAR RSU Retention Awards into 195,619 NU RSU Retention Awards valued at $7.2 million.

NU Incentive Plan: NU maintains long-term equity-based incentive plans under the NU Incentive Plan in which NU, CL&P, PSNH and WMECO employees, officers and board members are entitled to participate. The NU Incentive Plan was approved in 2007, and authorized NU to grant up to 4,500,000 new shares for various types of awards, including RSUs and performance shares, to eligible employees, officers, and board members. As of June 30, 2012 and December 31, 2011, NU had 2,530,024 and 2,685,615 common shares, respectively, available for issuance under the NU Incentive Plan. In addition to the NU Incentive Plan, NU maintains an ESPP for all eligible employees.

NSTAR Incentive Plans: Awards may continue to be granted following the merger under the NSTAR 2007 Long-Term Incentive Plan; however, no additional awards will be granted under the NSTAR 1997 Share Incentive Plan. The aggregate number of common shares initially authorized for issuance under the NSTAR 2007 Long-Term Incentive Plan was 3,500,000. As of June 30, 2012 and December 31, 2011, there were 977,922 and 988,729 common shares, respectively, available for issuance under the NSTAR 2007 Long-Term Incentive Plan.

For the six months ended June 30, 2012 and 2011, additional tax benefits totaling $2.8 million and $1.1 million, respectively, increased cash flows from financing activities.

RSUs: NU has granted RSUs under the 2004 through 2012 incentive programs that are subject to three-year graded vesting schedules for employees, and one-year graded vesting schedules for board members. RSUs are paid in shares, reduced by amounts sufficient to satisfy withholdings, subsequent to vesting. A summary of RSU transactions is as follows:

			Weighted Average
	RSUs		Grant-Date
RSUs	(Units)		Fair Value
Outstanding as of December 31, 2011		959,920	$	26.36
Granted		538,724	$	32.72
Converted NSTAR awards upon merger		617,394	$	36.79
Converted from NU performance shares upon merger		451,358	$	34.32
Shares issued		(300,460)	$	27.90
Forfeited		(76,361)	$	34.77
Outstanding as of June 30, 2012		2,190,575	$	31.97

As of June 30, 2012 and December 31, 2011, the number and weighted average grant-date fair value of unvested RSUs was 1,380,118 and $34.62 per share, and 403,108 and $28.70 per share, respectively. The number and weighted average grant-date fair value of RSUs vested during 2012 was 459,274 and $30.02 per share, respectively. As of June 30, 2012, 805,038 RSUs were fully vested and an additional 1,311,112 are expected to vest.

Performance Shares: NU had granted performance shares under the annual Long-Term Incentive programs that vested based upon the extent to which the Company achieved targets at the end of three-year performance measurement periods. Performance shares are paid in shares, after the performance measurement period. A summary of performance share transactions is as follows:

	Performance		Weighted Average
	Shares		Grant-Date
Performance Shares	(Units)		Fair Value
Outstanding as of December 31, 2011		483,133	$	29.18
Granted		226,326	$	34.46
Converted to RSUs upon merger		(451,358)	$	34.32
Shares issued		(106,773)	$	24.52
Forfeited		-	$	-
Outstanding as of June 30, 2012		151,328	$	25.04

Upon closing of the merger with NSTAR, 451,358 performance shares under the NU 2011 and 2012 Long-Term Incentive Programs converted to RSUs according to the terms of these programs. The remaining performance shares were measured based upon a modified performance period through the date of the merger in accordance with the terms of the NU 2010 Incentive Program with distribution in 2013.

The total compensation cost recognized by NU, CL&P, NSTAR Electric, PSNH and WMECO for share-based compensation awards was as follows:

NU	For the Three Months Ended				For the Six Months Ended
(Millions of Dollars)	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Compensation Cost Recognized	$	12.8	$	3.0	$	16.4	$	6.1
Associated Future Income Tax Benefit Recognized		5.1		1.2		6.6		2.4

	For the Three Months Ended
	June 30, 2012								June 30, 2011
(Millions of Dollars)	CL&P		NSTAR Electric		PSNH		WMECO		CL&P		NSTAR Electric⁽¹⁾		PSNH		WMECO
Compensation Cost Recognized	$	0.9	$	2.8	$	0.3	$	0.2	$	1.7	$	1.9	$	0.6	$	0.3
Associated Future Income Tax Benefit Recognized		0.4		1.1		0.1		0.1		0.7		0.7		0.2		0.1

	For the Six Months Ended
	June 30, 2012								June 30, 2011
(Millions of Dollars)	CL&P		NSTAR Electric⁽¹⁾		PSNH		WMECO		CL&P		NSTAR Electric⁽¹⁾		PSNH		WMECO
Compensation Cost Recognized	$	3.0	$	4.9	$	1.1	$	0.6	$	3.5	$	3.8	$	1.2	$	0.7
Associated Future Income Tax Benefit Recognized		1.2		1.9		0.4		0.3		1.4		1.5		0.5		0.3

As of June 30, 2012, there was $34.9 million of total unrecognized compensation cost related to nonvested share-based awards for NU, $6.8 million for CL&P, $9.8 million for NSTAR Electric, $2.5 million for PSNH and $1.5 million for WMECO. This cost is expected to be recognized ratably over a weighted-average period of 2.37 years for NU, 2.17 years for CL&P, 2.41 years for NSTAR Electric, and 2.15 years for PSNH and WMECO.

Stock Options: Awards are available for grant under the NU Incentive Plan and the NSTAR 2007 Long-Term Incentive Plan. Options currently outstanding expire ten years from the date of grant and the fair value of each stock option grant was estimated using the Black-Scholes option pricing model. The weighted average remaining contractual lives for the options outstanding as of June 30, 2012 is 4.7 years. A summary of stock option transactions is as follows:

			Exercise Price Per Share
						Weighted		Intrinsic Value
	Options		Range			Average		(Millions)
Outstanding and Exercisable as of December 31, 2011		47,374	$ 18.58	-	$ 18.90	$	18.78
Converted NSTAR Options upon merger		2,664,894	$ 16.47	-	$ 28.12	$	23.99
Exercised		(340,607)				$	23.84	$	4.3
Forfeited and cancelled		-
Outstanding and Exercisable as of June 30, 2012		2,371,661	$ 18.45	-	$ 28.12	$	23.90	$	35.4

Cash received for options exercised during the six months ended June 30, 2012 totaled $8.1 million. The tax benefit realized from stock options exercised totaled $1.8 million for the six months ended June 30, 2012.

Employee Share Purchase Plan: NU maintains an ESPP for all eligible employees, which allows for NU common shares to be purchased by employees at the end of successive six-month offering periods at 95 percent of the closing market price on the last day of each six-month period. Employees are permitted to purchase shares having a value not exceeding 25 percent of their compensation as of the beginning of the offering period up to a limit of $25,000 per annum. The ESPP qualifies as a non-compensatory plan under accounting guidance for share-based payments, and no compensation expense is recorded for ESPP purchases.

During 2012, employees purchased 20,555 shares at a discounted price of $33.01. Employees purchased 35,476 shares in 2011 at discounted prices of $31.27 and $32.30. As of June 30, 2012 and December 31, 2011, 876,147 and 896,702 shares, respectively, remained available for future issuance under the ESPP.

An income tax rate of 40 percent is used to estimate the tax effect on total share-based payments determined under the fair value-based method for all awards. The Company generally settles stock option exercises and fully vested RSUs and performance shares with the issuance of new common shares.