REGULATORY ACCOUNTING

Eversource's Regulated companies are subject to rate regulation that is based on cost recovery and meets the criteria for application of accounting guidance for rate-regulated operations, which considers the effect of regulation on the timing of the recognition of certain revenues and expenses. The Regulated companies' financial statements reflect the effects of the rate-making process. The rates charged to the customers of Eversource's Regulated companies are designed to collect each company's costs to provide service, including a return on investment.

Management believes it is probable that each of the Regulated companies will recover its 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 if 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.

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



Eversource	As of March 31, 2017		As of December 31, 2016
(Millions of Dollars)	As of March 31, 2017		As of December 31, 2016
Benefit Costs	$	1,782.5	$	1,817.8
Derivative Liabilities	416.3		423.3
Income Taxes, Net	645.4		644.5
Storm Restoration Costs	375.8		385.3
Goodwill-related	459.3		464.4
Regulatory Tracker Mechanisms	578.9		576.6
Contractual Obligations - Yankee Companies	70.6		84.9
Other Regulatory Assets	110.9		129.5
Total Regulatory Assets	4,439.7		4,526.3
Less: Current Portion	875.0		887.6
Total Long-Term Regulatory Assets	$	3,564.7	$	3,638.7



	As of March 31, 2017								As of December 31, 2016
(Millions of Dollars)	CL&P		NSTAR Electric		PSNH		WMECO		CL&P		NSTAR Electric		PSNH		WMECO
Benefit Costs	$	421.5	$	429.9	$	181.1	$	85.1	$	429.3	$	438.6	$	184.2	$	86.7
Derivative Liabilities	413.5		2.5		—		—		420.5		2.8		—		—
Income Taxes, Net	435.9		90.4		23.4		30.9		437.0		89.7		24.2		30.8
Storm Restoration Costs	225.1		118.5		17.0		15.2		239.8		112.5		17.1		15.9
Goodwill-related	—		394.3		—		—		—		398.7		—		—
Regulatory Tracker Mechanisms	170.5		245.9		101.8		49.1		123.9		257.3		104.5		46.7
Other Regulatory Assets	71.1		46.1		31.6		9.0		76.6		47.5		32.7		11.3
Total Regulatory Assets	1,737.6		1,327.6		354.9		189.3		1,727.1		1,347.1		362.7		191.4
Less: Current Portion	370.1		276.5		111.3		66.0		335.5		289.4		117.2		64.1
Total Long-Term Regulatory Assets	$	1,367.5	$	1,051.1	$	243.6	$	123.3	$	1,391.6	$	1,057.7	$	245.5	$	127.3

Regulatory Costs in Other Long-Term Assets: Eversource's Regulated companies had $91.4 million (including $5.0 million for CL&P, $33.3 million for NSTAR Electric, $12.9 million for PSNH and $22.1 million for WMECO) and $86.3 million (including $5.9 million for CL&P, $35.0 million for NSTAR Electric, $8.2 million for PSNH, and $20.1 million for WMECO) of additional regulatory costs as of March 31, 2017 and December 31, 2016, 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 were as follows:



Eversource	As of March 31, 2017		As of December 31, 2016
(Millions of Dollars)	As of March 31, 2017		As of December 31, 2016
Cost of Removal	$	469.6	$	459.7
Benefit Costs	130.8		136.2
Regulatory Tracker Mechanisms	188.8		145.3
AFUDC - Transmission	65.8		65.8
Other Regulatory Liabilities	37.2		42.1
Total Regulatory Liabilities	892.2		849.1
Less: Current Portion	199.2		146.8
Total Long-Term Regulatory Liabilities	$	693.0	$	702.3



	As of March 31, 2017								As of December 31, 2016
(Millions of Dollars)	CL&P		NSTAR Electric		PSNH		WMECO		CL&P		NSTAR Electric		PSNH		WMECO
Cost of Removal	$	42.5	$	273.3	$	44.8	$	10.6	$	38.8	$	271.6	$	44.1	$	8.6
Benefit Costs	—		109.8		—		—		—		113.1		—		—
Regulatory Tracker Mechanisms	44.5		62.2		15.0		12.7		37.2		63.7		10.7		14.7
AFUDC - Transmission	49.9		7.2		—		8.7		50.2		6.9		—		8.7
Other Regulatory Liabilities	23.2		0.2		3.0		—		21.0		0.2		2.7		0.1
Total Regulatory Liabilities	160.1		452.7		62.8		32.0		147.2		455.5		57.5		32.1
Less: Current Portion	58.9		62.2		17.2		12.9		47.1		63.7		12.7		14.9
Total Long-Term Regulatory Liabilities	$	101.2	$	390.5	$	45.6	$	19.1	$	100.1	$	391.8	$	44.8	$	17.2