DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2012

Notes To Consolidated Financial Statements [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

5.       DERIVATIVE INSTRUMENTS

The Regulated companies purchase and procure energy and energy-related products for their customers, which are subject to price volatility. The costs associated with supplying energy to customers are recoverable through customer rates. The Regulated companies manage the risks associated with the price volatility of energy and energy-related products through the use of derivative contracts, many of which meet the definition of and are designated as "normal purchases or normal sales" (normal) under the applicable accounting guidance, and the use of nonderivative contracts.

Derivative contracts that are not recorded as normal are recorded at fair value as current or long-term derivative assets or liabilities. For the Regulated companies, regulatory assets or liabilities are recorded for the changes in fair values of derivatives, as costs are, and management believes they will continue to be, recovered from or refunded incustomers rates. For NU's remaining unregulated wholesale marketing contracts, changes in fair values of derivatives are included in Net Income. The costs and benefits of derivative contracts that meet the definition of normal are recognized in Operating Expenses or Operating Revenues on the accompanying consolidated statements of income, as applicable, as electricity or natural gas is delivered.

CL&P, NSTAR Electric and WMECO mitigate the risks associated with the price volatility of energy and energy-related products through the use of SS, LRS, and basic service contracts, which fix the price of electricity purchased for customers and are accounted for as normal. CL&P, NSTAR Electric and WMECO haveentered into derivative and nonderivative contracts for the purchase of energy and energy-related products and contracts that are derivatives. NU also has NYMEX future contracts in order to reduce variability associated with the purchase price of approximately 11.5millionMMBtu of natural gas.

The costs or benefits from all of the Regulated companies' derivative contracts are recoverable from or refundable to customers, and therefore, changes in fair value are recorded as Regulatory Assets or Regulatory Liabilities on the accompanying consolidated balance sheets.

NU, through Select Energy, has one remaining fixed price forward sales contract that expires on December 31, 2013 to serve electrical load that is part of its remaining unregulated wholesale energy marketing portfolio. NU mitigates the price risk associated with this contract through the use of several forward purchase contracts. The contracts are accounted for at fair value, and changes in their fair values are recorded in Purchased Power, Fuel and Transmission on the accompanying consolidated statements of income.

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 current and long-term portions, in the accompanying consolidated balance sheets. Cash collateral posted or collected under master netting agreements is recorded as an offset to the derivative asset or liability. The following tables present the gross fair values of contracts categorized by risk type and the net amounts recorded as current or long-term derivative asset or liability:

		As of December 31, 2012
		Commodity Supply and		Collateral		Net Amount Recorded as
(Millions of Dollars)		Price Risk Management		and Netting (1)		Derivative Asset/(Liability) (2)
Current Derivative Assets:
Level 2:
	Other	$	0.2	$	-	$	0.2
Level 3:
	CL&P		17.7		(12.0)		5.7
	Other		5.5		-		5.5
Total Current Derivative Assets		$	23.4	$	(12.0)	$	11.4
Long-Term Derivative Assets:
Level 3:
	CL&P	$	159.7	$	(69.1)	$	90.6
Total Long-Term Derivative Assets		$	159.7	$	(69.1)	$	90.6
Current Derivative Liabilities:
Level 2:
	Other	$	(19.9)	$	0.6	$	(19.3)
Level 3:
	CL&P		(96.9)		-		(96.9)
	NSTAR Electric		(1.0)		-		(1.0)
Total Current Derivative Liabilities		$	(117.8)	$	0.6	$	(117.2)
Long-Term Derivative Liabilities:
Level 2:
	Other	$	(0.2)	$	-	$	(0.2)
Level 3:
	CL&P		(865.6)		-		(865.6)
	NSTAR Electric		(13.9)		-		(13.9)
	WMECO		(3.0)		-		(3.0)
Total Long-Term Derivative Liabilities		$	(882.7)	$	-	$	(882.7)

		As of December 31, 2011
		Commodity Supply and		Collateral		Net Amount Recorded as
(Millions of Dollars)		Price Risk Management		and Netting (1)		Derivative Asset/(Liability) (2)
Current Derivative Assets:
Level 3:
	CL&P	$	17.9	$	(11.6)	$	6.3
	Other		4.7		-		4.7
Total Current Derivative Assets (3)		$	22.6	$	(11.6)	$	11.0
Long-Term Derivative Assets:
Level 3:
	CL&P	$	174.2	$	(80.4)	$	93.8
	Other		4.6		-		4.6
Total Long-Term Derivative Assets		$	178.8	$	(80.4)	$	98.4
Current Derivative Liabilities:
Level 3:
	CL&P	$	(95.9)	$	-	$	(95.9)
	WMECO		(0.1)		-		(0.1)
	Other		(16.1)		4.5		(11.6)
Total Current Derivative Liabilities		$	(112.1)	$	4.5	$	(107.6)
Long-Term Derivative Liabilities:
Level 3:
	CL&P	$	(935.8)	$	-	$	(935.8)
	WMECO		(7.2)		-		(7.2)
	Other		(17.3)		0.4		(16.9)
Total Long-Term Derivative Liabilities (4)		$	(960.3)	$	0.4	$	(959.9)

       Amounts represent cash collateral posted under master netting agreements and the netting of derivative assets and liabilities. See "Credit Risk" below for discussion of cash collateral posted under master netting agreements.

(2)       Current derivative assets are included in Prepayments and Other Current Assets on the accompanying consolidated balance sheets. NSTAR Electric and WMECO derivative liabilities are included in Other Current Liabilities and Other Long-Term Liabilities on their accompanying consolidated balance sheets.

(3)In addition to the amounts reflected in the table, as of December 31, 2011, NU had $2.3 million of hedging instruments that were classified as Level 2 in the fair value hierarchy, which related to a fair value hedge that expired on April 2, 2012 and was included in Prepayments and Other Current Assets on the accompanying consolidated balance sheet.

(4)       As of December 31, 2011, NSTAR Electric had $3.4 million of derivative liabilities classified as Level 3 within the fair value hierarchy and included in Other Long-Term Liabilities on the accompanying NSTAR Electric consolidated balance sheet. These amounts are not included in NU consolidated as of December 31, 2011.

The business activities of the Company that resulted in the recognition of derivative assets also create exposure to various counterparties. As of December 31, 2012, NU and CL&P's derivative assets are exposed to counterparty credit risk. Of these amounts, $96.5million and $96.3million, respectively, is contracted with investment grade entities and the remainder is contracted with multiple other counterparties.

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

Derivatives Not Designated as Hedges

Commodity Supply and Price Risk Management: As required by regulation, CL&P has capacity-related contracts with generation facilities. These contracts and similar UI contracts have an expected capacity of 787 MW. CL&P has a sharing agreement with UI, with 80 percent of each contract allocated to CL&P and 20 percent allocated to UI. The capacity contracts extend through 2026 and obligate the utilities to make or receive payments on a monthly basis to or from the generation facilities based on the difference between a set capacity price and the forward capacity market price received in the ISO-NE capacity markets. In addition, CL&P has a contract to purchase 0.1 million MWh of energy per year through 2020.

NSTAR Electric has a renewable energy contract to purchase 0.1 million MWh of energy per year through 2018. NSTAR Electric also has a capacity related contract for up to 35 MW that extends through 2019.

WMECO has a renewable energy contract to purchase 0.1 million MWh of energy per year through 2028 with a facility that is expected to achieve commercial operation by November 2013.

As of December 31, 2012 and 2011, NU had approximately 24 thousand MWh and 123 thousand MWh, respectively, of supply volumes remaining in its unregulated wholesale portfolio when expected sales are compared with supply contracts.

The following table presents the realized and unrealized gains/(losses) associated with NU's derivative contracts not designated as hedges (See Level 3 tables in the "Valuations using significant unobservable inputs" section for CL&P, NSTAR Electric and WMECO gains and losses on derivative contracts):

Location of Amounts		Amounts Recognized on Derivatives
Recognized on Derivatives		For the Years Ended December 31,
(Millions of Dollars)		2012		2011		2010
NU
Balance Sheet:
	Regulatory Assets	$	(29.0)	$	(162.0)	$	(95.7)
Statement of Income:
	Purchased Power, Fuel and Transmission		(0.7)		0.5		2.7

Hedging Instruments

Fair Value Hedge: NU parent had a fixed to floating interest rate swap on its $263 million, fixed rate senior note that matured on April 1, 2012. This interest rate swap qualified and was designated as a fair value hedge. Prior to the settlement of the swap on April 2, 2012, $2.5 million of interest benefit was recorded in Net Income in the first quarter of 2012. For the years ended December 31, 2011 and 2010, $10.5million and $10.9million of interest benefit was recorded in Net Income, respectively.

Cash Flow Hedges:In 2011, PSNH and WMECO settled interest rate swaps associated with $280 million and $50 million, respectively, of long-term debt issuances and as a result PSNH and WMECO recorded pre-tax reductions of $18.2 million and $6.9 million, respectively, to AOCI that are being amortized over the remaining lives of the associated debt.In addition, NU, CL&P, PSNH and WMECO continue to amortize interest rate swaps settled in prior years from AOCI into Interest Expense over the remaining life of the associated long-term debt. The pre-tax impact of cash flow hedging instruments on AOCI is as follows:

	Gains/(Losses) Recognized on		Gains/(Losses) Reclassified from AOCI
	Derivative Instruments		into Interest Expense
	For the Year Ended December 31,		For the Years Ended December 31,
(Millions of Dollars)	2011		2012		2011		2010
NU	$	(25.1)	$	(3.3)	$	(1.3)	$	(0.4)
CL&P		-		(0.7)		(0.7)		(0.7)
PSNH		(18.2)		(2.0)		(0.8)		(0.2)
WMECO		(6.9)		(0.5)		(0.1)		0.1

For further information, see Note 15, "Accumulated Other Comprehensive Income/(Loss)," to the consolidated financial statements.

Credit Risk

Certain of NU's contracts contain credit risk contingent features. These features require NU to maintain investment grade credit ratings from the major rating agencies and to post collateral for contracts in a net liability position over specified credit limits. The following summarizes the fair value of derivative contracts that were in a net liability position and subject to credit risk contingent features, the fair value of cash collateral, and the additional collateral that would be required to be posted by NU if the unsecured debt credit ratings of NU parent were downgraded to below investment grade as of December31, 2012 and2011

As of December 31, 2012

As of December 31, 2011

Additional Collateral

Additional Collateral

Fair Value Subject

Required if

Fair Value Subject

Required if

to Credit Risk

Cash

Downgraded Below

to Credit Risk

Cash

Downgraded Below

(Millions of Dollars)

Contingent Features

Collateral Posted

Investment Grade

Contingent Features

Collateral Posted

Investment Grade

NU

$

(15.3)

$

-

$

17.4

$

(23.5)

$

4.1

$

19.9

Fair Value Measurements of Derivative Instruments

Valuation of Derivative Instruments:Derivative contracts classified as Level 2 in the fair value hierarchy relate to the financial contracts for natural gas futures and the remaining unregulated wholesale marketing sourcing contracts to purchase energy for periods in which prices are quoted in an active market. Prices are obtained from broker quotes and are 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.

The fair value of derivative contracts classified as Level 3 utilize significant unobservable inputs. The 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 in future years for which quoted prices in an active market exist. Fair value measurements categorized in Level 3 of the fair value hierarchy are prepared by individuals with expertise in valuation techniques, pricing of energy and energy-related products, and accounting requirements. The future power and capacity prices for periods that are not quoted in an active market or established at auction are based on available market data and are escalated based on estimates of inflation to address the full time period of the contract.

Valuations of derivative contracts using discounted cash flow methodology include assumptions regarding the timing and likelihood of scheduled payments and also reflect non-performance 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. Valuations incorporate estimates of premiums or discounts that would be required by a market participant to arrive at an exit price, using historical market transactions adjusted for the terms of the contract.

The following is a summary of NU's, including CL&P's, NSTAR Electric's and WMECO's, Level 3 derivative contracts and the range of the significant unobservable inputs utilized in the valuations over the duration of the contracts:

	Range	Period Covered
Energy Prices:
NU	$43 - $90 per MWh	2018 - 2028
CL&P	$50 - $55 per MWh	2018 - 2020
WMECO	$43 - $90 per MWh	2018 - 2028
Capacity Prices:
NU	$1.40 - $10.53 per kW-Month	2016 - 2028
CL&P	$1.40 - $9.83 per kW-Month	2016 - 2026
NSTAR Electric	$1.40 - $3.39 per kW-Month	2016 - 2019
WMECO	$1.40 - $10.53 per kW-Month	2016 - 2028
Forward Reserve:
NU, CL&P	$0.35 - $0.90 per kW-Month	2013 - 2024
REC Prices:
NU	$25 - $85 per REC	2013 - 2028
NSTAR Electric	$25 - $71 per REC	2013 - 2018
WMECO	$25 - $85 per REC	2013 - 2028

Exit price premiums of 11 percent through 32 percent are also applied on these contracts and reflect the most recent market activity available for similar type contracts.

Significant increases or decreases in future power or capacity prices in isolation would decrease or increase, respectively, the fair value of the derivative liability. Any increases in the risk premiums would increase the fair value of the derivative liabilities. Changes in these fair values are recorded as a regulatory asset or liability and would not impact net income.

Valuations using significant unobservable inputs: The following tables present changes for the years ended December 31, 2012 and 2011, 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 fair value as of January 1, 2012 reflects a reclassification of remaining unregulated wholesale marketing sourcing contracts that had previously been presented as a portfolio along with the unregulated wholesale marketing sales contract as Level 3 under the highest and best use valuation premise. These contracts are now classified within Level 2 of the fair value hierarchy.

(Millions of Dollars)		NU		CL&P		NSTAR Electric(1)		WMECO
Derivatives, Net:
Fair Value as of January 1, 2011		$	(840.2)	$	(806.1)	$	(2.4)	$	-
Net Realized/Unrealized Gains/(Losses) Included in:
	Net Income		0.5		-		-		-
	Regulatory Assets		(161.0)		(153.6)		(4.3)		(7.3)
Settlements			38.5		28.1		3.3		-
Fair Value as of December 31, 2011		$	(962.2)	$	(931.6)	$	(3.4)	$	(7.3)
Liabilities Assumed due to Merger with NSTAR			(5.4)		-		-		-
Transfer to Level 2			32.2		-		-		-
Net Realized/Unrealized Gains/(Losses) Included in:
	Net Income (2)		10.9		-		-		-
	Regulatory Assets		(29.2)		(21.6)		(15.2)		4.3
Settlements			75.1		87.0		3.7		-
Fair Value as of December 31, 2012		$	(878.6)	$	(866.2)	$	(14.9)	$	(3.0)

• NSTAR Electric amounts are included in NU consolidated from the date of the merger, April 10, 2012, through December 31, 2012. NSTAR Electric amounts are not included in NU consolidated for the year ended December 31, 2011.
• The Net Income impact for the year ended December 31, 2012 relates to the unregulated wholesale marketing sales contract and is offset by the gains/(losses) on the unregulated sourcing contracts classified as Level 2 in the fair value hierarchy, resulting in total net losses of $0.7 million