SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Basis of Presentation

Eversource Energy is a public utility holding company primarily engaged, through its wholly-owned regulated utility subsidiaries, in the energy delivery business. Eversource Energy's wholly-owned regulated utility subsidiaries consist of CL&P, NSTAR Electric and PSNH (electric utilities), Yankee Gas and NSTAR Gas (natural gas utilities) and Aquarion (water utilities). Eversource provides energy delivery and/or water service to approximately four million electric, natural gas and water customers through eight regulated utilities in Connecticut, Massachusetts and New Hampshire.

The unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH include the accounts of each of their respective subsidiaries. Intercompany transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P are herein collectively referred to as the "financial statements."

The combined notes to the financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. The accompanying financial statements should be read in conjunction with the Combined Notes to Financial Statements included in Item 8, "Financial Statements and Supplementary Data," of the Eversource 2018 Form 10-K, which was filed with the SEC on February 26, 2019. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The financial statements contain, in the opinion of management, all adjustments (including normal, recurring adjustments) necessary to present fairly Eversource's, CL&P's, NSTAR Electric's and PSNH's financial position as of March 31, 2019 and December 31, 2018, and the results of operations, comprehensive income, common shareholders' equity, and cash flows for the three months ended March 31, 2019 and 2018. The results of operations, comprehensive income, and cash flows for the three months ended March 31, 2019 and 2018 are not necessarily indicative of the results expected for a full year.

Eversource consolidates CYAPC and YAEC because CL&P's, NSTAR Electric's and PSNH's combined ownership and voting interests in each of these entities is greater than 50 percent. Intercompany transactions between CL&P, NSTAR Electric, PSNH and the CYAPC and YAEC companies have been eliminated in consolidation of the Eversource financial statements.

Eversource's utility subsidiaries' electric, natural gas and water distribution and transmission businesses are subject to rate-regulation that is based on cost recovery and meets the criteria for application of accounting guidance for entities with rate-regulated operations, which considers the effect of regulation on the differences in the timing of the recognition of certain revenues and expenses from those of other businesses and industries. See Note 2, "Regulatory Accounting," for further information.

Certain reclassifications of prior period data were made in the accompanying financial statements to conform to the current period presentation.

B. Accounting Standards

Accounting Standards Issued but Not Yet Effective: In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326), which provides a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Under the new guidance, immediate recognition of all credit losses expected over the life of a financial instrument is required. The new standard also revises the other-than-temporary impairment model for available-for-sale debt securities. The standard is effective January 1, 2020, and requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings. The Company is assessing the impacts of this standard on the accounting for credit losses on its financial instruments, including accounts receivable.

Accounting Standards Recently Adopted: On January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842), which amended existing lease accounting guidance. The Company applied the Topic 842 lease criteria to new leases and lease renewals entered into effective on or after January 1, 2019. The ASU required balance sheet recognition of leases deemed to be operating leases as well as additional disclosure requirements. The recognition, measurement and presentation of expenses and cash flows were not significantly changed.

The Company also adopted the modified retrospective transition method allowed in ASU 2018-11, Leases (Topic 842) - Targeted Improvements, which allowed the Company to adopt the new leases standard as of January 1, 2019, with prior periods presented in the financial statements continuing to follow existing lease accounting guidance under Topic 840 (Leases) in the accounting literature. Implementation of ASU 2018-11 had no effect on retained earnings, and the requirements of the new lease standard (Topic 842) are reflected in the 2019 financial statements and footnotes.

The Company elected the practical expedient package whereby it did not need to reassess whether or not an existing contract is or contains a lease or whether a lease is an operating or capital lease, and it did not need to reassess initial direct costs for leases. Election of this practical expedient allowed us to carry forward our historical lease classifications. The Company elected the practical expedient to not reevaluate land easements existing at adoption if they were not previously accounted for as leases. The Company also elected to use the discount rate as of the January 1, 2019 implementation date to discount its operating lease liabilities. The Company did not elect the hindsight practical expedient to determine the lease term for existing leases.

The Company determined the impact the ASUs had on its financial statements by reviewing its lease population and identifying lease data needed for the disclosure requirements. The Company implemented a new lease accounting system in 2019 to ensure ongoing compliance with the ASU’s requirements. Adoption of the new standard resulted in the recording of operating lease liabilities and right-of-use assets on the balance sheet upon transition at January 1, 2019 of $58.0 million at Eversource, $25.3 million at NSTAR Electric, $0.6 million at CL&P, and $0.6 million at PSNH. Implementation of the new guidance did not have an impact on each company’s results of operations or cash flows.

C. Northern Pass

Northern Pass is Eversource's planned 1,090 MW HVDC transmission line that will interconnect from the Québec-New Hampshire border to Franklin, New Hampshire and an associated alternating current radial transmission line between Franklin and Deerfield, New Hampshire. As of March 31, 2019, our capitalized Northern Pass project costs were approximately $311 million.

On January 25, 2018, Northern Pass was selected as the winning bidder in the Massachusetts Clean Energy Request for Proposals ("RFP"). In March 2018, the New Hampshire Site Evaluation Committee ("NHSEC") issued a written decision denying Northern Pass’ siting application after which the Massachusetts EDCs revoked the selection of, and terminated contract negotiations with, Northern Pass under the Massachusetts Clean Energy RFP. On July 12, 2018, the NHSEC issued a written decision denying Northern Pass’ April 2018 motion for rehearing. On October 12, 2018, the New Hampshire Supreme Court accepted an appeal filed by NPT, which alleged that the NHSEC failed to follow applicable law in its review of the project. Subsequently, the NHSEC transmitted the record of its proceedings to the New Hampshire Supreme Court on December 11, 2018. Briefing of the appeal began on February 4, 2019 and concluded on April 10, 2019. The New Hampshire Supreme Court will hear oral arguments on May 15, 2019 and a decision is expected later this year. NPT intends to continue to pursue NHSEC approval to construct the project.

Consistent with Eversource’s and HQ’s long-term relationship to bring clean energy into New England, Eversource and HQ remain committed to Northern Pass and the many benefits this project will bring to our customers and the region. We continue to believe that our project costs are recoverable based on our expectation that the Northern Pass project remains probable of being placed in service. If, as a result of future events and changes in circumstances, a future recoverability review were to conclude that our project costs are not recoverable, then we would reduce Northern Pass' project costs to the estimated fair value, which could result in most of our $311 million of capitalized project costs being impaired. Such an impairment could have a material adverse effect on our financial position and results of operations.

D. Provision for Uncollectible Accounts

Eversource, including CL&P, NSTAR Electric and PSNH, presents its receivables at estimated net realizable value by maintaining a provision for uncollectible accounts. This provision is determined based upon a variety of judgments and factors, including the application of an estimated uncollectible percentage to each receivable aging category. The estimate is based upon historical collection and write-off experience and management's assessment of collectability from customers. Management continuously assesses the collectability of receivables and adjusts collectability estimates based on actual experience. Receivable balances are written off against the provision for uncollectible accounts when the customer accounts are terminated and these balances are deemed to be uncollectible.

The PURA allows CL&P and Yankee Gas to accelerate the recovery of accounts receivable balances attributable to qualified customers under financial or medical duress (uncollectible hardship accounts receivable) outstanding for greater than 180 days and 90 days, respectively. The DPU allows NSTAR Electric and NSTAR Gas to recover in rates, amounts associated with certain uncollectible hardship accounts receivable. These uncollectible hardship customer account balances are included in Regulatory Assets or Other Long-Term Assets on the balance sheets.

The total provision for uncollectible accounts is included in Receivables, Net on the balance sheets. The provision for uncollectible hardship accounts is included in the total uncollectible provision balance. The provision balances are as follows:



	Total Provision for Uncollectible Accounts				Provision for Uncollectible Hardship Accounts
(Millions of Dollars)	As of March 31, 2019		As of December 31, 2018		As of March 31, 2019		As of December 31, 2018
Eversource	$	223.3	$	212.7	$	134.6	$	131.5
CL&P	93.0		88.0		75.2		71.9
NSTAR Electric	74.8		74.5		40.9		42.5
PSNH	11.0		11.1		—		—

Uncollectible expense associated with customers' accounts receivable included in Operations and Maintenance expense on the statements of income is as follows:



	For the Three Months Ended
(Millions of Dollars)	March 31, 2019		March 31, 2018
Eversource	$	18.6	$	19.6
CL&P	4.1		3.9
NSTAR Electric	6.0		7.5
PSNH	1.7		1.7

E. Fair Value Measurements

Fair value measurement guidance is applied to derivative contracts that are not elected or designated as "normal purchases" or "normal sales" ("normal") and to the marketable securities held in trusts. Fair value measurement guidance is also applied to valuations of the investments used to calculate the funded status of pension and PBOP plans, the nonrecurring fair value measurements of nonfinancial assets such as goodwill and AROs, and the estimated fair value of preferred stock, long-term debt and RRBs.

Fair Value Hierarchy: In measuring fair value, Eversource uses observable market data when available in order to minimize the use of unobservable inputs. Inputs used in fair value measurements are categorized into three fair value hierarchy levels for disclosure purposes. The entire fair value measurement is categorized based on the lowest level of input that is significant to the fair value measurement. Eversource evaluates the classification of assets and liabilities measured at fair value on a quarterly basis, and Eversource's policy is to recognize transfers between levels of the fair value hierarchy as of the end of the reporting period. The three levels of the fair value hierarchy are described below:

Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 - Inputs are quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs are observable.

Level 3 - Quoted market prices are not available. Fair value is derived from valuation techniques in which one or more significant inputs or assumptions are unobservable. Where possible, valuation techniques incorporate observable market inputs that can be validated to external sources such as industry exchanges, including prices of energy and energy-related products.

Uncategorized - Investments that are measured at net asset value are not categorized within the fair value hierarchy.

Determination of Fair Value: The valuation techniques and inputs used in Eversource's fair value measurements are described in Note 4, "Derivative Instruments," Note 5, "Marketable Securities," and Note 11, "Fair Value of Financial Instruments," to the financial statements.

F. Investments in Unconsolidated Affiliates

Revolution Wind and South Fork Wind: On February 8, 2019, Eversource and Ørsted entered into a 50-50 partnership for key

offshore wind assets in the Northeast. Eversource's initial payment and contribution under the terms of the partnership agreements totaled approximately $225 million for a 50 percent interest in North East Offshore LLC, which holds the Revolution Wind and South Fork Wind power projects, as well as a 257-square-mile tract off the coasts of Massachusetts and Rhode Island. This equity investment is included in long-term assets on the balance sheet and earnings impacts are included in Other Income, Net on the statement of income.

G. Other Income, Net

The components of Other Income, Net on the statements of income were as follows:



	For the Three Months Ended
	March 31, 2019										March 31, 2018
(Millions of Dollars)	Eversource		CL&P			NSTAR Electric			PSNH		Eversource		CL&P			NSTAR Electric		PSNH
Pension, SERP and PBOP Non-Service Income Components	$	7.4	$	(0.6	)	$	7.0		$	0.5	$	15.2	$	3.0		$	8.4	$	2.3
AFUDC Equity	10.9		2.6			4.0			0.2		9.7		2.8			3.4		—
Equity in Earnings	5.0		—			0.2			—		4.6		—			—		—
Investment Income/(Loss)	1.2		1.7			(0.3		)	0.4		0.7		(0.1		)	0.6		—
Interest Income ⁽¹⁾	6.5		0.4			0.2			5.9		3.5		0.9			0.2		2.4
Other	—		(0.2		)	—			—		0.1		—			—		—
Total Other Income, Net	$	31.0	$	3.9		$	11.1		$	7.0	$	33.8	$	6.6		$	12.6	$	4.7

⁽¹⁾See Note 2, "Regulatory Accounting" for interest income recognized in 2019 for the equity return component of carrying charges on storm costs at PSNH.

H. Other Taxes

Eversource's companies that serve customers in Connecticut collect gross receipts taxes levied by the state of Connecticut from their customers. These gross receipts taxes are recorded separately with collections in Operating Revenues and with payments in Taxes Other Than Income Taxes on the statements of income as follows:



	For the Three Months Ended
(Millions of Dollars)	March 31, 2019		March 31, 2018
Eversource	$	45.0	$	43.4
CL&P	36.2		35.6

As agents for state and local governments, Eversource's companies that serve customers in Connecticut and Massachusetts collect certain sales taxes that are recorded on a net basis with no impact on the statements of income.

Separate from the amounts above are $10.7 million and $12.7 million of amounts recorded as Taxes Other than Income Taxes for the three months ended March 31, 2019 and 2018, respectively, related to the future remittance to the State of Connecticut of energy efficiency funds collected from customers in Operating Revenues. These amounts are recorded separately, with collections in Operating Revenues and with payments in Taxes Other than Income Taxes on the Eversource and CL&P statements of income.

I. Supplemental Cash Flow Information

Non-cash investing activities include plant additions included in Accounts Payable as follows:



(Millions of Dollars)	As of March 31, 2019		As of March 31, 2018
Eversource	$	336.3	$	274.4
CL&P	121.9		117.7
NSTAR Electric	83.2		59.5
PSNH	30.4		36.0

The following table reconciles cash as reported on the balance sheets to the cash and restricted cash balance as reported on the statements of cash flows:



	As of March 31, 2019								As of December 31, 2018
(Millions of Dollars)	Eversource		CL&P		NSTAR Electric		PSNH		Eversource		CL&P		NSTAR Electric		PSNH
Cash as reported on the Balance Sheets	$	35.1	$	7.5	$	1.8	$	4.0	$	108.1	$	87.7	$	1.6	$	1.4
Restricted cash included in:
Prepayments and Other Current Assets	45.9		3.6		13.0		21.1		72.1		3.5		13.0		47.5
Marketable Securities	24.2		0.3		0.1		0.5		25.9		0.4		0.1		0.6
Other Long-Term Assets	3.2		—		—		3.2		3.2		—		—		3.2
Cash and Restricted Cash reported on the Statements of Cash Flows	$	108.4	$	11.4	$	14.9	$	28.8	$	209.3	$	91.6	$	14.7	$	52.7

Restricted cash included in Prepayments and Other Current Assets and Other Long-Term Assets primarily represents cash collections related to the PSNH RRB customer charges that are held in trust, and required ISO-NE cash deposits. Restricted cash included in Marketable Securities represents money market funds held in trusts to fund certain non-qualified executive benefits and restricted trusts to fund CYAPC and YAEC's spent nuclear fuel storage facilities obligations.