INCOME TAXES

12 Months Ended

Dec. 31, 2013

Notes To Consolidated Financial Statements [Abstract]

11. INCOME TAXES

The tax effect of temporary differences is accounted for in accordance with the rate-making treatment of the applicable regulatory commissions and relevant accounting authoritative literature. The components of income tax expense are as follows:

NU	For the Years Ended December 31,
(Millions of Dollars)	2013		2012 ⁽¹⁾		2011
Current Income Taxes:
Federal	$	8.8	$	(30.9)	$	3.0
State		(9.4)		17.6		(26.0)
Total Current		(0.6)		(13.3)		(23.0)
Deferred Income Taxes, Net:
Federal		386.2		291.3		187.7
State		45.4		0.8		9.1
Total Deferred		431.6		292.1		196.8
Investment Tax Credits, Net		(4.1)		(3.9)		(2.8)
Income Tax Expense	$	426.9	$	274.9	$	171.0

		For the Years Ended December 31,
		2013								2012								2011
				NSTAR								NSTAR								NSTAR
(Millions of Dollars)		CL&P		Electric		PSNH		WMECO		CL&P		Electric		PSNH		WMECO		CL&P		Electric		PSNH		WMECO
Current Income
	Taxes:
	Federal	$	20.1	$	95.8	$	(8.2)	$	(53.4)	$	(47.8)	$	93.5	$	(0.9)	$	(24.7)	$	13.9	$	64.9	$	(25.8)	$	0.1
	State		(6.7)		29.6		3.6		4.2		3.1		27.6		3.4		3.4		(34.4)		30.2		0.1		0.3
Total Current			13.4		125.4		(4.6)		(49.2)		(44.7)		121.1		2.5		(21.3)		(20.5)		95.1		(25.7)		0.4
Deferred Income
	Taxes, Net:
	Federal		114.9		49.8		64.5		84.7		141.5		11.4		46.5		51.2		106.4		74.8		67.7		22.1
	State		15.1		(1.0)		11.2		2.3		(0.5)		(7.1)		12.0		2.7		6.2		(2.8)		7.9		1.0
Total Deferred			130.0		48.8		75.7		87.0		141.0		4.3		58.5		53.9		112.6		72.0		75.6		23.1
Investment Tax
	Credits, Net		(1.7)		(1.3)		0.0		(0.4)		(1.9)		(1.4)		0.0		(0.5)		(2.1)		(1.4)		-		(0.3)
Income Tax Expense		$	141.7	$	172.9	$	71.1	$	37.4	$	94.4	$	124.0	$	61.0	$	32.1	$	90.0	$	165.7	$	49.9	$	23.2

⁽¹⁾ NSTAR amounts were included in NU beginning April 10, 2012.

A reconciliation between income tax expense and the expected tax expense at the statutory rate is as follows:

NU		For the Years Ended December 31,
(Millions of Dollars, except percentages)		2013		2012 ⁽¹⁾		2011
Income Before Income Tax Expense		$	1,220.6	$	808.0	$	571.5

Statutory Federal Income Tax Expense at 35%			427.2		282.8		200.0
Tax Effect of Differences:
	Depreciation		(7.4)		(10.8)		(14.2)
	Investment Tax Credit Amortization		(4.1)		(3.9)		(2.8)
	Other Federal Tax Credits		(3.7)		(3.8)		(3.5)
	State Income Taxes, Net of Federal Impact		27.6		4.4		22.1
	ESOP		(8.0)		(6.4)		(2.2)
	Tax Asset Valuation Allowance/Reserve Adjustments		(4.3)		7.6		(33.1)
	Other, Net		(0.4)		5.0		4.7
Income Tax Expense		$	426.9	$	274.9	$	171.0
Effective Tax Rate			35.0%		34.0%		29.9%

		For the Years Ended December 31,
		2013								2012								2011
(Millions of Dollars,				NSTAR								NSTAR								NSTAR
	except percentages)	CL&P		Electric		PSNH		WMECO		CL&P		Electric		PSNH		WMECO		CL&P		Electric		PSNH		WMECO
Income Before Income
	Tax Expense	$	421.1	$	441.4	$	182.5	$	97.8	$	304.2	$	314.2	$	157.9	$	86.6	$	340.2	$	418.2	$	150.2	$	66.2

Statutory Federal Income
	Tax Expense at 35%		147.4		154.5		63.9		34.2		106.5		110.0		55.3		30.3		119.1		146.4		52.6		23.2
Tax Effect of Differences:
	Depreciation		(7.0)		0.1		0.6		0.0		(9.0)		0.0		(0.3)		0.2		(8.1)		0.0		(4.4)		0.1
	Investment Tax Credit
	Amortization		(1.7)		(1.3)		0.0		(0.4)		(1.9)		(1.4)		0.0		(0.5)		(2.1)		(1.4)		-		(0.3)
	Other Federal Tax
	Credits		0.0		0.0		(3.7)		0.0		0.0		0.0		(3.8)		0.0		(0.1)		0.0		(3.4)		0.0
	State Income Taxes,
	Net of Federal Impact		5.0		18.6		9.6		4.2		0.1		13.4		10.0		4.0		4.0		17.9		5.2		0.9
	ESOP		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		-		0.0		-		-
	Tax Asset Valuation
	Allowance/Reserve
	Adjustments		0.4		0.0		0.0		0.0		1.6		0.0		0.0		0.0		(22.3)		0.0		-		-
	Regulatory Decision Non-
	Plant Flow Through		0.0		0.0		0.0		0.0		0.0		0.0		0.0		(1.3)		0.0		0.0		-		-
	Other, Net		(2.4)		1.0		0.7		(0.6)		(2.9)		2.0		(0.2)		(0.6)		(0.5)		2.8		(0.1)		(0.7)
Income Tax Expense		$	141.7	$	172.9	$	71.1	$	37.4	$	94.4	$	124.0	$	61.0	$	32.1	$	90.0	$	165.7	$	49.9	$	23.2
Effective Tax Rate			33.6%		39.2%		39.0%		38.2%		31.0%		39.5%		38.6%		37.1%		26.5%		39.6%		33.2%		35.0%

⁽¹⁾NSTAR amounts were included in NU beginning April 10, 2012.

NU, CL&P, NSTAR Electric, PSNH and WMECO file a consolidated federal income tax return and unitary, combined and separate state income tax returns. These entities are also parties to a tax allocation agreement under which taxable subsidiaries do not pay any more taxes than they would have otherwise paid had they filed a separate company tax return, and subsidiaries generating tax losses, if any, are paid for their losses when utilized.

Deferred tax assets and liabilities are recognized for the future tax effects of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The tax effects of temporary differences that give rise to the net accumulated deferred income tax obligations are as follows:

NU			As of December 31,
(Millions of Dollars)			2013		2012
Deferred Tax Assets:
	Employee Benefits		$	435.2	$	811.4
	Derivative Liabilities and Change in Fair Value of Energy Contracts			272.9		380.6
	Regulatory Deferrals			272.7		257.9
	Allowance for Uncollectible Accounts			65.0		64.2
	Tax Effect - Tax Regulatory Assets			16.2		17.2
	Federal Net Operating Loss Carryforwards			158.0		214.6
	Purchase Accounting Adjustment			132.8		146.4
	Other			230.6		242.4
Total Deferred Tax Assets				1,583.4		2,134.7
	Less: Valuation Allowance			24.3		4.2
Net Deferred Tax Assets			$	1,559.1	$	2,130.5
Deferred Tax Liabilities:
	Accelerated Depreciation and Other Plant-Related Differences		$	3,806.5	$	3,468.8
	Property Tax Accruals			95.1		89.6
	Regulatory Amounts:
		Other Regulatory Deferrals		1,146.7		1,561.1
		Tax Effect - Tax Regulatory Assets		248.2		217.2
		Goodwill Regulatory Asset - 1999 Merger		211.5		210.9
		Derivative Assets		30.1		36.2
		Securitized Contract Termination Costs		0.3		16.6
		Other		156.8		136.1
Total Deferred Tax Liabilities			$	5,695.2	$	5,736.5

			As of December 31,
			2013								2012
					NSTAR								NSTAR
(Millions of Dollars)			CL&P		Electric		PSNH		WMECO		CL&P		Electric		PSNH		WMECO
Deferred Tax Assets:
	Employee Benefits		$	56.0	$	38.3	$	15.5	$	(1.8)	$	141.2	$	116.3	$	64.8	$	16.3
	Derivative Liabilities and Change in
		Fair Value of Energy Contracts		272.4		3.3		0.0		(2.9)		375.9		5.8		-		(1.7)
	Regulatory Deferrals			61.5		114.7		40.9		1.0		35.5		123.6		43.9		6.3
	Allowance for Uncollectible Accounts			31.2		15.4		3.1		3.3		30.4		16.2		2.9		3.2
	Tax Effect - Tax Regulatory Assets			4.7		5.4		2.1		1.6		5.2		6.0		1.7		1.7
	Federal Net Operating Loss Carryforwards			51.0		0.0		56.6		18.6		82.0		-		71.4		15.1
	Other			75.3		31.3		40.3		8.3		82.8		26.0		33.7		8.0
Total Deferred Tax Assets				552.1		208.4		158.5		28.1		753.0		293.9		218.4	$	48.9
	Less: Valuation Allowance			23.1		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Net Deferred Tax Assets			$	529.0	$	208.4	$	158.5	$	28.1	$	753.0	$	293.9	$	218.4	$	48.9
Deferred Tax Liabilities:
	Accelerated Depreciation and Other
	Plant-Related Differences		$	1,238.1	$	1,179.4	$	526.6	$	361.1	$	1,194.7	$	1,079.3	$	476.5	$	261.3
	Property Tax Accruals			49.3		25.3		7.1		5.9		44.4		23.1		6.8		5.1
	Regulatory Amounts:
		Other Regulatory Deferrals		550.4		276.2		109.3		49.3		677.7		379.6		149.3		74.5
		Tax Effect - Tax Regulatory Assets		160.1		36.0		16.3		18.2		151.8		20.9		15.8		13.9
		Goodwill Regulatory Asset - 1999 Merger		-		181.6		-		-		-		181.0		-		-
		Derivative Assets		29.0		0.5		-		-		36.2		-		-		-
		Securitized Contract Termination Costs		-		0.0		0.0		0.3		-		5.5		7.9		3.3
		Other		20.6		26.4		28.0		3.3		10.1		30.2		14.1		2.3
Total Deferred Tax Liabilities			$	2,047.5	$	1,725.4	$	687.3	$	438.1	$	2,114.9	$	1,719.6	$	670.4	$	360.4

Carryforwards: The following tables provide the amounts and expiration dates of state tax credit and loss carryforwards and federal tax credit and net operating loss carryforwards:

	As of December 31, 2013
					NSTAR						Year
(Millions of Dollars)	NU		CL&P		Electric		PSNH		WMECO		Expiration Begins
Federal Net Operating Loss	$	451.3	$	145.8	$	0.0	$	161.8	$	53.3	2031
Federal Tax Credit		8.0		0.0		0.0		7.6		0.0	2031
State Tax Credit		104.7		86.8		0.0		0.0		0.0	2013
State Loss Carryforwards		12.1		0.0		0.0		0.0		0.0	2013

	As of December 31, 2012
					NSTAR						Year
(Millions of Dollars)	NU		CL&P		Electric		PSNH		WMECO		Expiration Begins
Federal Net Operating Loss	$	606.9	$	234.3	$	0.0	$	204.0	$	43.3	2031
Federal Tax Credit		3.8		0.0		0.0		3.8		0.0	2031
State Tax Credit		110.2		75.2		0.0		0.0		0.0	2013
State Loss Carryforwards		74.9		0.0		0.0		0.0		0.0	2013

For 2013, state credit and state loss carryforwards have been partially reserved by a valuation allowance of $23.7 million (net of federal income tax). For 2012, the state loss carryforwards had been partially reserved by a valuation allowance of $0.3 million (net of federal income tax).

Unrecognized Tax Benefits: A reconciliation of the activity in unrecognized tax benefits, all of which would impact the effective tax rate if recognized, is as follows:


(Millions of Dollars)		NU		CL&P
Balance as of January 1, 2011		$	101.2	$	80.8
	Gross Increases - Current Year		8.0		1.4
	Gross Decreases - Prior Year		(35.7)		(35.7)
Balance as of December 31, 2011			73.5		46.5
	Gross Increases - Current Year		10.3		2.5
	Gross Increases - Prior Year		0.1		-
	Gross Decreases - Prior Year		(0.8)		-
Balance as of December 31, 2012			83.1		49.0
	Gross Increases - Current Year		8.2		2.1
	Gross Decreases - Prior Year		(1.1)		(0.3)
	Settlements		(49.8)		(39.4)
	Lapse of Statute of Limitations		(2.2)		-
Balance as of December 31, 2013		$	38.2	$	11.4

Interest and Penalties: Interest on uncertain tax positions is recorded and generally classified as a component of Other Interest Expense on the statements of income. However, when resolution of uncertainties results in the Company receiving interest income, any related interest benefit is recorded in Other Income, Net on the statements of income. No penalties have been recorded. If penalties are recorded in the future, then the estimated penalties would be classified as a component of Other Income, Net on the statements of income. The amount of interest expense/(income) on uncertain tax positions recognized and the related accrued interest payable/(receivable) are as follows:

Other Interest	For the Years Ended December 31,						Accrued Interest	As of December 31,
Expense/(Income)	2013		2012		2011		Expense	2013		2012
(Millions of Dollars)							(Millions of Dollars)
NU ⁽¹⁾	$	(8.6)	$	3.1	$	(2.8)	NU	$	1.5	$	10.1
CL&P		(4.0)		1.3		(3.7)	CL&P		0.0		4.0
NSTAR Electric		0.0		0.0		2.0	NSTAR Electric		0.0		0.0
PSNH		0.0		0.0		(0.6)	PSNH		0.0		0.0

(1) NSTAR amounts were included in NU beginning April 10, 2012.

Tax Positions: During 2013, NU received a Final Determination from the Connecticut Department of Revenue Services (DRS) that concluded its audit of NU's Connecticut income tax returns for the years 2005 through 2008. The DRS Determination resulted in total NU and CL&P after-tax benefits of $13.6 million and $6.9 million, respectively, that included a reduction in NU and CL&P pre-tax interest expense of $8.7 million and $4 million, or $5.2 million and $2.4 million after-tax, respectively. Further, the income tax expense impact resulted in a tax benefit to NU and CL&P of $8.4 million and $4.5 million after-tax, respectively.

During 2011, NU recorded an after-tax benefit of $29.1 million related to various state tax settlements and certain other adjustments. This benefit was recorded as a reduction to both interest expense and income tax expense (including NU and CL&P tax expense reductions of approximately $22.4 million).

Open Tax Years: The following table summarizes NU, CL&P, NSTAR Electric, PSNH and WMECO's tax years that remain subject to examination by major tax jurisdictions as of December 31, 2013:

Description		Tax Years
Federal		2013
Connecticut		2010-2013
Massachusetts		2010-2013
New Hampshire		2010-2013

NU estimates that during the next twelve months, differences of a non-timing nature could be resolved, resulting in a zero to $2.0 million decrease in unrecognized tax benefits by NU. These estimated changes are not expected to have a material impact on the earnings of NU. Other companies' impacts are not expected to be material.

2013 Federal Legislation: On January 2, 2013, the "American Taxpayer Relief Act of 2012" became law, which extended the accelerated deduction of depreciation to businesses through 2013. This extended stimulus provided NU with cash flow benefits of approximately $300 million (approximately $95 million at CL&P, $85 million at NSTAR Electric, $35 million at PSNH, and $50 million at WMECO).

On September 13, 2013, the Internal Revenue Service issued final Tangible Property regulations that are meant to simplify, clarify and make more administrable previously issued guidance. In the third quarter of 2013, CL&P recorded an after-tax valuation allowance of $10.5 million against its deferred tax assets as a result of these regulations. NU is in compliance with the new regulations, but continues to evaluate several new potential elections. Therefore, a change to the valuation allowance at CL&P could result once NU completes the review of the impact of the final regulations.

2013 Massachusetts: On July 24, 2013, Massachusetts enacted a law that changed the income tax rate applicable to utility companies effective January 1, 2014, from 6.5 percent to 8 percent. The tax law change required NU to remeasure its accumulated deferred income taxes and resulted in NU increasing its deferred tax liability with an offsetting regulatory asset of approximately $61 million at its utility companies ($46.3 million at NSTAR Electric and $9.8 million at WMECO).

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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