The rates charged to the customers of NU's Regulated companies are designed to collect each company's costs to provide service, including a return on investment. Therefore, the accounting policies of the Regulated companies follow the application of accounting guidance for entities with rate-regulated operations and reflect the effects of the rate-making process.

Management believes it is probable that each of the Regulated companies will recover their respective investments in long-lived assets, including regulatory assets. If management were to determine that it could no longer apply the accounting guidance applicable to rate-regulated enterprises to any of the Regulated companies' operations, or that management could not conclude it is probable that costs would be recovered from customers in future rates, the costs would be charged to net income in the period in which the determination is made.

	As of June 30, 2014		As of December 31, 2013
(Millions of Dollars)	NU		NU
Benefit Costs	$	1,146.7	$	1,240.2
Derivative Liabilities		431.4		638.0
Income Taxes, Net		631.8		626.2
Storm Restoration Costs		503.9		589.6
Goodwill-related		515.7		525.9
Regulatory Tracker Mechanisms		275.1		323.4
Contractual Obligations - Yankee Companies		128.4		154.2
Buy Out Agreements for Power Contracts		56.7		70.2
Other Regulatory Assets		117.0		126.8
Total Regulatory Assets		3,806.7		4,294.5
Less: Current Portion		467.2		535.8
Total Long-Term Regulatory Assets	$	3,339.5	$	3,758.7

	As of June 30, 2014								As of December 31, 2013
			NSTAR								NSTAR
(Millions of Dollars)	CL&P		Electric		PSNH		WMECO		CL&P		Electric		PSNH		WMECO
Benefit Costs	$	251.9	$	323.4	$	81.6	$	46.2	$	297.7	$	496.7	$	100.6	$	57.3
Derivative Liabilities		424.6		6.3		-		-		630.4		7.7		-		-
Income Taxes, Net		426.2		81.4		38.0		40.8		415.5		84.0		40.3		43.7
Storm Restoration Costs		328.0		107.2		34.7		34.0		397.8		109.3		43.7		38.8
Goodwill-related		-		442.8		-		-		-		451.5		-		-
Regulatory Tracker Mechanisms		8.1		131.8		87.9		20.7		8.0		169.5		83.3		32.6
Buy Out Agreements for Power Contracts		-		52.0		4.7		-		-		64.7		5.5		-
Other Regulatory Assets		63.7		54.7		36.0		14.9		64.6		55.9		38.1		16.7
Total Regulatory Assets		1,502.5		1,199.6		282.9		156.6		1,814.0		1,439.3		311.5		189.1
Less: Current Portion		110.0		178.6		95.3		36.3		150.9		204.1		92.2		43.0
Total Long-Term Regulatory Assets	$	1,392.5	$	1,021.0	$	187.6	$	120.3	$	1,663.1	$	1,235.2	$	219.3	$	146.1

Benefit Costs: For information related to the Regulated companies' pension and other postretirement benefits, see Note 7, "Pension Benefits and Postretirement Benefits Other Than Pensions."

Storm Restoration Costs: On March 12, 2014, the PURA approved recovery of $365 million of deferred storm restoration costs associated with five major storms that occurred in 2011 and 2012. CL&P will recover the $365 million with carrying charges in its distribution rates over a six-year period beginning December 1, 2014. On June 17, 2014, the PURA ordered CL&P to use the DOE Phase II Damages proceeds of $65.4 million to offset the $365 million in 2011 and 2012 deferred storm restoration costs, which are reflected in the deferred storm restoration costs regulatory asset. For further information on the DOE Phase II Damages proceeds received from the Yankee Companies, see Note 8C, "Commitments and Contingencies - Contractual Obligations - Yankee Companies," to the financial statements.

Regulatory Costs in Other Long-Term Assets: The Regulated companies had $64.5 million ($3.4 million for CL&P, $33.9 million for NSTAR Electric, and $12 million for WMECO) and $65.1 million ($7.3 million for CL&P, $33.4 million for NSTAR Electric, and $10.1 million for WMECO) of additional regulatory costs as of June 30, 2014 and December 31, 2013, respectively, that were included in Other Long-Term Assets on the balance sheets. These amounts represent incurred costs for which recovery has not yet been specifically approved by the applicable regulatory agency. However, based on regulatory policies or past precedent on similar costs, management believes it is probable that these costs will ultimately be approved and recovered from customers in rates.

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

	As of June 30, 2014		As of December 31, 2013
(Millions of Dollars)	NU		NU
Cost of Removal	$	435.3	$	435.1
Regulatory Tracker Mechanisms		305.2		151.2
AFUDC - Transmission		67.4		68.1
Other Regulatory Liabilities		56.0		52.9
Total Regulatory Liabilities		863.9		707.3
Less: Current Portion		359.9		204.3
Total Long-Term Regulatory Liabilities	$	504.0	$	503.0

	As of June 30, 2014								As of December 31, 2013
			NSTAR								NSTAR
(Millions of Dollars)	CL&P		Electric		PSNH		WMECO		CL&P		Electric		PSNH		WMECO
Cost of Removal	$	22.8	$	255.7	$	48.7	$	-	$	29.1	$	250.0	$	49.7	$	-
Regulatory Tracker Mechanisms		143.2		60.2		34.8		45.1		95.6		21.9		21.6		21.1
AFUDC - Transmission		54.2		4.0		-		9.2		54.7		4.1		-		9.3
Other Regulatory Liabilities		10.0		29.8		3.9		0.7		8.4		31.1		1.0		3.4
Total Regulatory Liabilities		230.2		349.7		87.4		55.0		187.8		307.1		72.3		33.8
Less: Current Portion		143.5		89.2		36.6		44.7		94.0		54.0		20.6		19.9
Total Long-Term Regulatory Liabilities	$	86.7	$	260.5	$	50.8	$	10.3	$	93.8	$	253.1	$	51.7	$	13.9

As a result of two FERC orders issued on June 19, 2014 in the pending base ROE complaint proceedings described in Note 8E, "Commitments and Contingencies – FERC Base ROE Complaints," in the second quarter of 2014, the Company recorded a series of reserves at its electric subsidiaries to recognize the potential financial impact of these rulings. The aggregate pre-tax charge totaled $54.7 million at NU, which represented reserves of $31.4 million at CL&P, $10.3 million at NSTAR Electric, $3.8 million at PSNH and $9.2 million at WMECO. As of June 30, 2014, the cumulative reserves totaled $79.3 million at NU, $44.7 million at CL&P, $16.2 million at NSTAR Electric, $6.2 million at PSNH and $12.2 million at WMECO. As of December 31, 2013, as a result of the FERC ALJ initial decision in the third quarter of 2013, the Company had an aggregate pre-tax reserve of $24.6 million at NU, which represented reserves of $13.3 million at CL&P, $5.9 million at NSTAR Electric, $2.4 million at PSNH and $3 million at WMECO. These reserves were recorded in each electric subsidiary's respective transmission regulatory tracker mechanism and as a reduction of operating revenues.

As a result of awards issued to the Yankee Companies for spent nuclear fuel lawsuits against the DOE described in Note 8C, "Commitments and Contingencies - Contractual Obligations - Yankee Companies," the Yankee Companies returned the DOE Phase II Damages proceeds to the member companies, including CL&P, NSTAR Electric, PSNH, and WMECO, for the benefit of their respective customers, effective June 1, 2014. CL&P's refund obligation to customers of $65.4 million was recorded as an offset to the deferred storm restoration costs regulatory asset, as directed by PURA. NSTAR Electric's, PSNH's and WMECO's refund obligation to customers of $29.1 million, $13.1 million and $18.1 million, respectively, was recorded as a regulatory liability in each electric subsidiary's respective regulatory tracker mechanisms.