Refer to the Glossary of Terms included in this combined Annual Report on Form 10-K for abbreviations and acronyms used throughout the combined notes to the consolidated financial statements.

NU Consolidated: NU is a public utility holding company primarily engaged through its wholly owned regulated utility subsidiaries in the energy delivery business. NU's wholly owned regulated utility subsidiaries included CL&P, PSNH, WMECO and Yankee Gas prior to NU's merger with NSTAR. On April 10, 2012, NU acquired 100 percent of the outstanding common shares of NSTAR, at which time NSTAR (through a successor, NSTAR LLC) became a direct wholly owned subsidiary of NU along with its regulated utility subsidiaries, NSTAR Electric and NSTAR Gas. NU provides energy delivery service to approximately 3.5 million electric and natural gas customers through six regulated utilities in Connecticut, Massachusetts and New Hampshire. See Note 2, "Merger of NU and NSTAR," for further information regarding the merger.

NU, CL&P, NSTAR Electric, PSNH and WMECO are reporting companies under the Securities Exchange Act of 1934. NU is a public utility holding company under the Public Utility Holding Company Act of 2005. Arrangements among the regulated electric companies and other NU companies, outside agencies and other utilities covering interconnections, interchange of electric power and sales of utility property are subject to regulation by the FERC. The Regulated companies are subject to regulation of rates, accounting and other matters by the FERC and/or applicable state regulatory commissions (the PURA for CL&P and Yankee Gas, the DPU for NSTAR Electric, NSTAR Gas and WMECO, and the NHPUC as well as certain regulatory oversight by the Vermont Public Service Board and the Maine Public Utilities Commission for PSNH).

Regulated Companies: CL&P, NSTAR Electric, PSNH and WMECO furnish franchised retail electric service in Connecticut, Massachusetts and New Hampshire. NSTAR Gas is engaged in the distribution and sale of natural gas to customers within central and eastern Massachusetts. Yankee Gas owns and operates Connecticut's largest natural gas distribution system. CL&P, NSTAR Electric, PSNH and WMECO's results include the operations of their respective distribution and transmission businesses. PSNH and WMECO's distribution results include the operations of their respective generation businesses. NU also has a regulated subsidiary, NPT, which was formed to construct, own and operate the Northern Pass line, a new HVDC transmission line from Québec to New Hampshire that will interconnect with a new HVDC transmission line being developed by a transmission subsidiary of HQ.

Other: As of December 31, 2012, NU Enterprises' primary business consisted of Select Energy's remaining energy wholesale marketing contracts with a municipal authority that expires on December 31, 2013 and related purchase contracts and NGS' operation and maintenance agreements as well as its subsidiary, E.S. Boulos Company, an electrical contractor based in Maine that NU Enterprises continues to own and manage. NUSCO, NSTAR Electric & Gas, RRR, Renewable Properties, Inc. and Properties, Inc. provide support services to NU, including its regulated companies. Harbor Electric Energy Company, a wholly-owned subsidiary of NSTAR Electric, provides distribution service and ongoing support to its only customer, the Massachusetts Water Resources Authority. NSTAR also has unregulated subsidiaries in telecommunications (NSTAR Communications, Inc.) and natural gas liquefaction and storage services (Hopkinton).

The consolidated financial statements of NU, CL&P, NSTAR Electric, PSNH and WMECO include the accounts of each of their respective subsidiaries. Intercompany transactions have been eliminated in consolidation.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NSTAR Electric continues to maintain reporting requirements as an SEC registrant. The information disclosed for NSTAR Electric represents its results of operations for each of the years ended December 31, 2012, 2011 and 2010 and the financial position as of December 31, 2012 and 2011, presented on a comparable basis. NU did not apply "push-down accounting" to NSTAR Electric, whereby the adjustments of assets and liabilities to fair value and the resultant goodwill would be shown on the financial statements of the acquired subsidiary. NU's consolidated financial information includes NSTAR LLC and its subsidiaries' results of operations from April 10, 2012 through December 31, 2012.

On April 10, 2012, upon consummation of the merger with NSTAR, NSTAR Electric's ownership in CYAPC and YAEC combined with CL&P's, PSNH's and WMECO's respective ownership interests in CYAPC and YAEC totaled greater than 50 percent, requiring NU to consolidate CYAPC and YAEC from April 10, 2012 and forward. The investment in CYAPC and YAEC had previously been accounted for under the equity method by NU. The consolidation of CYAPC and YAEC results in NU recording nuclear decommissioning trust marketable securities of $340.4 million, regulatory assets of $214 million, long-term debt associated with the long-term spent nuclear fuel disposal liabilities of $179.3 million, net accumulated deferred income tax liability of $56.4 million and asset retirement obligations related to decommissioning activity of $311.4 million as of December 31, 2012. At the NU consolidated level, intercompany transactions between CL&P, NSTAR Electric, PSNH and WMECO and the CYAPC and YAEC companies have been eliminated in consolidation. For CL&P, NSTAR Electric, PSNH and WMECO, the investment in CYAPC and YAEC continue to be accounted for under the equity method. See Note 1J, "Summary of Significant Accounting Policies – Equity Method Investments," for further information.

NPT, a limited liability company, was formed to construct, own and operate the Northern Pass transmission project. NPT and Hydro Renewable Energy entered into a TSA whereby NPT will sell to Hydro Renewable Energy electric transmission rights over the Northern Pass for a 40-year term at cost of service rates. NPT will be required to maintain a capital structure of 50 percent debt and 50 percent equity. On April 10, 2012, upon consummation of the merger with NSTAR, an NSTAR subsidiary that owned 25 percent of NPT was merged into NUTV, resulting in NUTV owning 100 percent of NPT. Accordingly, 100 percent ownership of NPT was reflected in Common Shareholders' Equity as of December 31, 2012 on the accompanying consolidated balance sheet. See Note 2, "Merger of NU and NSTAR," and Note 19, "Common Shareholders' Equity and Noncontrolling Interests," for further information.

NU's utility subsidiaries are subject to the application of accounting guidance for entities with rate-regulated operations that considers the effect of regulation resulting from differences in the timing of the recognition of certain revenues and expenses from those of other businesses and industries. NU's utility subsidiaries' energy delivery business is subject to rate-regulation that is based on cost recovery and meets the criteria for application of rate-regulated accounting. See Note 3, "Regulatory Accounting," for further information.

Certain prior year amounts in NSTAR Electric's accompanying consolidated balance sheet, statements of income and cash flows have been reclassified between line items for comparative purposes and in order to conform to NU's presentation. The reclassifications did not affect NSTAR Electric's net income. The NSTAR Electric consolidated statements of cash flows were revised to correct an error in the presentation of cash deposits related to the RRBs.
The impact of this revision was an increase in investing cash inflows from Other Investing Activities in an amount of $1.7 million and $24.1 million and a corresponding increase to financing cash outflows from Retirements of
Rate Reduction Bonds for the years ended December 31, 2011 and 2010, respectively. These revisions had no impact on NSTAR Electric's results of operations or cash balance and are not deemed material, individually or
in the aggregate, to the previously issued consolidated financial statements.

Certain changes in classification and corresponding reclassifications of prior year data were made in the accompanying consolidated balance sheets and statements of income for NU, CL&P, PSNH and WMECO and statements of cash flows for NU, CL&P and WMECO for comparative purposes to conform the current year presentation. The consolidated statements of income reflect the reclassification of transmission expenses from Other Operating Expenses, as originally reported, to Purchased Power, Fuel and Transmission and the reclassification of energy efficiency expenses primarily from Other Operating Expenses, as originally reported, to Energy Efficiency Programs. In addition, Other Operating Expenses and Maintenance, as originally reported, were combined and are reported in aggregate as Operations and Maintenance. The reclassifications on the statements of income were as follows:

	Transmission Expense				Energy Efficiency Expense
	For the Years Ended December 31,				For the Years Ended December 31,
(Millions of Dollars)	2011		2010		2011		2010
NU	$	77.2	$	48.9	$	131.4	$	124.0
CL&P		52.6		39.4		90.3		92.3
PSNH		19.1		26.4		12.9		12.0
WMECO		15.9		18.3		21.8		16.3

Effective January 1, 2012, NSTAR Electric changed its estimates with respect to the allowance for doubtful accounts, incurred but not reported claims on medical benefits, general and workers' compensation liabilities and compensation accruals. The total aggregate impact of these changes in estimates on NSTAR Electric's accompanying consolidated statements was a decrease to net income of $11.4 million, after-tax, for the year ended December 31, 2012.

In accordance with accounting guidance on noncontrolling interests in consolidated financial statements, the Preferred Stock of CL&P and the Preferred Stock of NSTAR Electric, which are not owned by NU or its consolidated subsidiaries and are not subject to mandatory redemption, have been presented as noncontrolling interests in the accompanying consolidated financial statements of NU. The Preferred Stock of CL&P and the Preferred Stock of NSTAR Electric are considered to be temporary equity and have been classified between liabilities and permanent shareholders' equity on the accompanying consolidated balance sheets of NU, CL&P and NSTAR Electric due to a provision in the preferred stock agreements of both CL&P and NSTAR Electric that grant preferred stockholders the right to elect a majority of the CL&P and NSTAR Electric Board of Directors, respectively, should certain conditions exist, such as if preferred dividends are in arrears for a specified amount of time. The Net Income reported in the accompanying consolidated statements of income and cash flows represents consolidated net income prior to apportionment to noncontrolling interests, which is represented by dividends on preferred stock of CL&P and NSTAR Electric.

NU evaluates events and transactions that occur after the balance sheet date but before financial statements are issued and recognizes in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed as of the balance sheet date and discloses, but does not recognize, in the financial statements subsequent events that provide evidence about the conditions that arose after the balance sheet date but before the financial statements are issued. See Note 23, "Subsequent Events," for further information.

In the first quarter of 2012, NU adopted the Financial Accounting Standards Board's (FASB) final Accounting Standards Update (ASU) on fair value measurement. The ASU did not have an impact on NU's financial position, results of operations or cash flows, but required additional financial statement disclosures related to fair value measurements. For further information, see Note 5, "Derivative Instruments," to the consolidated financial statements.

In the first quarter of 2012, NU adopted the FASB's final ASU on testing goodwill for impairment. The ASU provides the election to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value; if so, quantitative testing is required. The ASU does not change existing guidance relating to when an entity should test goodwill for impairment or the methodology to be utilized in performing quantitative testing. NU did not utilize the election provided by this ASU in its current year evaluation of goodwill.

In the first quarter of 2012, NU adopted the FASB's final ASU on the presentation of comprehensive income. The ASU does not change existing guidance on which items should be presented in other comprehensive income but requires other comprehensive income to be presented as part of a single continuous statement of comprehensive income or in a statement of other comprehensive income immediately following the statement of net income. The ASU did not affect the calculation of net income, comprehensive income or EPS. The ASU did not have an impact on NU's financial position, results of operations or cash flows.

Cash and cash equivalents include cash on hand and short-term cash investments that are highly liquid in nature and have original maturities of three months or less. At the end of each reporting period, any overdraft amounts are reclassified from Cash and Cash Equivalents to Accounts Payable on the accompanying consolidated balance sheets.

NU, including CL&P, NSTAR Electric, PSNH and WMECO, presents its receivables at net realizable value by maintaining a provision for uncollectible accounts receivables. This provision is determined based upon a variety of factors, including applying an estimated uncollectible account percentage to each receivable aging category, based upon historical collection and write-off experience and management's assessment of collectibility from individual customers. Management assesses the collectibility of receivables, and if circumstances change, collectibility estimates are adjusted accordingly. Receivable balances are written off against the provision for uncollectible accounts when the 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 90 days. As a result of the January 2011 DPU rate case decision, WMECO is allowed to recover amounts associated with basic service and certain uncollectible hardship accounts receivable in rates. As of December 31, 2012, CL&P, WMECO and Yankee Gas had uncollectible hardship accounts receivable reserves in the amount of $65.2 million, $4.7 million and $6.4 million, respectively, with the corresponding bad debt expense recorded as Regulatory Assets or Other Long-Term Assets as these amounts are probable of recovery. As of December 31, 2011, these amounts totaled $68.6 million, $5.4 million and $6.8 million, respectively. These amounts are reflected in the total provision for uncollectible accounts in the table below.

The provision for uncollectible accounts, which is included in Receivables, Net on the accompanying consolidated balance sheets, was as follows:

	As of December 31,
(Millions of Dollars)	2012		2011
NU ⁽²⁾	$	165.5	$	115.7
CL&P ⁽²⁾		77.6		83.5
NSTAR Electric⁽¹⁾		44.1		27.1
PSNH		6.8		7.2
WMECO⁽²⁾		8.5		10.0

(1) NSTAR Electric amounts are not included in NU consolidated as of December 31, 2011.

(2) NU, CL&P and WMECO balances as of December 31, 2011 have been reclassified to include the uncollectible hardship reserve in the total provision for uncollectible accounts.

Fuel, Materials and Supplies include natural gas, coal, biomass, oil and materials purchased primarily for construction or operation and maintenance purposes. Natural gas inventory, coal, biomass, and oil are valued at their respective weighted average cost. Materials and supplies are valued at the lower of average cost or market.

PSNH is subject to federal and state laws and regulations that regulate emissions of air pollutants, including SO2, CO2, and NOx related to its regulated generation units, and uses SO2, CO2, and NOx emissions allowances. At the end of each compliance period, PSNH is required to relinquish SO2, CO2, and NOx emissions allowances corresponding to the actual respective emissions emitted by its generating units over the compliance period. SO2 and NOx emissions allowances are obtained through an annual allocation from the federal and state regulators that are granted at no cost and through purchases from third parties. CO2 emissions allowances are acquired through auctions and through purchases from third parties.

SO2, CO2, and NOx emissions allowances are recorded within Fuel, Materials and Supplies and are classified on the balance sheet as short-term or long-term depending on the period in which they are expected to be utilized against actual emissions. As of December 31, 2012 and 2011, PSNH had $0.4 million and $0.8 million, respectively, of short-term SO2, CO2, and NOx emissions allowances classified as Fuel, Materials and Supplies on the accompanying consolidated balance sheets and $19.4 million and $19.4 million, respectively, of long-term SO2 and CO2 emissions allowances classified as Other Long-Term Assets on the accompanying consolidated balance sheets.

SO2, CO2, and NOx emissions allowances are charged to expense based on their weighted average cost as they are utilized against emissions volumes at PSNH's generating units. PSNH recorded expenses of $0.4 million, $5.1 million and $6.6 million for the years ended December 31, 2012, 2011, and 2010, respectively, which were included in Purchased Power, Fuel and Transmission on the accompanying consolidated statements of income. These costs are recovered from customers through energy supply revenues.

As of December 31, 2012, NU, CL&P and PSNH had $3.3 million, $1.3 million and $1.7 million, respectively, of restricted cash, primarily relating to amounts held in escrow, insurance proceeds on bondable property at PSNH and amounts related to the sale of land, which were included in Prepayments and Other Current Assets on the accompanying consolidated balance sheets. As of December 31, 2011, these amounts were $17.9 million, $9.4 million and $7 million for NU, CL&P and PSNH, respectively.

As of December 31, 2012, NU had $14.6 million of cash collateral posted not subject to master netting agreements, primarily with ISO-NE. As of December 31, 2011, there was no cash posted with ISO-NE and $10.9 million posted with other counterparties.

As of December 31, 2012, NU, NSTAR Electric, PSNH and WMECO had $69.4 million, $42.2 million, $22 million and $5.1 million, respectively, on deposit related to subsidiaries used to facilitate the issuance of RRBs. As of December 31, 2011, these amounts were $29.5 million, $40.9 million, $24.4 million and $5.1 million, respectively. These amounts are included in Prepayments and Other Current Assets and Other Long-Term Assets on the accompanying consolidated balance sheets. As of December 31, 2011, the NSTAR Electric amount was not included in NU consolidated.

NU, including CL&P, NSTAR Electric, PSNH, and WMECO, applies fair value measurement guidance to derivative contracts recorded at fair value and to the marketable securities held in the NU supplemental benefit trust, WMECO's spent nuclear fuel trust and CYAPC's and YAEC's nuclear decommissioning trusts. Fair value measurement guidance is also applied to investment valuations used to calculate the funded status of NU's Pension and PBOP Plans, including NSTAR Electric's Pension Plan, and nonrecurring fair value measurements of nonfinancial assets such as goodwill and AROs.

Fair Value Hierarchy: In measuring fair value, NU uses observable market data when available and minimizes 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. NU evaluates the classification of assets and liabilities measured at fair value on a quarterly basis, and NU'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.

Determination of Fair Value: The valuation techniques and inputs used in NU's fair value measurements are described in Note 2, "Merger of NU and NSTAR," Note 5, "Derivative Instruments," Note 6, "Marketable Securities," Note 7, "Asset Retirement Obligations," and Note 14, "Fair Value of Financial Instruments," to the consolidated financial statements.

Many of CL&P's, NSTAR Electric's, PSNH's and WMECO's contracts for the purchase and sale of energy or energy-related products are derivatives, along with NU Enterprises' remaining wholesale marketing contracts and NSTAR Gas' NYMEX futures. The accounting treatment for energy contracts entered into varies and depends on the intended use of the particular contract and on whether or not the contract is a derivative.

The application of derivative accounting is complex and requires management judgment in the following respects: identification of derivatives and embedded derivatives, election and designation of the "normal purchases or normal sales" (normal) exception, identifying, electing and designating hedge relationships, assessing and measuring hedge effectiveness, and determining the fair value of derivatives. All of these judgments can have a significant impact on the consolidated financial statements. Any change in the fair value of derivatives related to the Regulated companies is offset by a regulatory asset or liability, as this change will be recovered from or refunded to customers in future rates.

The fair value of derivatives is based upon the contract terms and conditions and the underlying market price or fair value per unit. When quantities are not specified in the contract, the Company determines whether the contract has a determinable quantity by using amounts referenced in default provisions and other relevant sections of the contract. The fair value of derivative assets and liabilities with the same counterparty are offset and recorded as a net derivative asset or liability on the consolidated balance sheets.

The judgment applied in the election of the normal exception (and resulting accrual accounting) includes the conclusion that it is probable at the inception of the contract and throughout its term that it will result in physical delivery of the underlying product and that the quantities will be used or sold by the business in the normal course of business. If facts and circumstances change and management can no longer support this conclusion, then the normal exception and accrual accounting is terminated and fair value accounting is applied prospectively.

The remaining wholesale marketing contracts that are marked-to-market derivative contracts are not considered to be held for trading purposes, and sales and purchase activity is reported on a net basis in Purchased Power, Fuel and Transmission on the accompanying consolidated statements of income.

For further information regarding derivative contracts of NU, CL&P, NSTAR Electric and WMECO and their accounting, see Note 5, "Derivative Instruments," to the consolidated financial statements.

Regional Decommissioned Nuclear Companies: CL&P, NSTAR Electric, PSNH and WMECO own common stock in three regional nuclear generation companies (CYAPC, YAEC and MYAPC, collectively referred to as the Yankee Companies), each of which owned a single nuclear generating facility that has been decommissioned. On April 10, 2012, upon consummation of the merger with NSTAR, NSTAR Electric's ownership in CYAPC and YAEC combined with CL&P's, PSNH's and WMECO's respective ownership interests in CYAPC and YAEC totaled greater than 50 percent, requiring NU to consolidate CYAPC and YAEC from April 10, 2012 and forward. The investment in CYAPC and YAEC had previously been accounted for under the equity method of accounting by NU. For CL&P, NSTAR Electric, PSNH and WMECO, the investment in CYAPC and YAEC continues to be accounted for under the equity method. At the NU consolidated level, intercompany transactions between CL&P, NSTAR Electric, PSNH and WMECO and the CYAPC and YAEC companies have been eliminated in consolidation.

Ownership interests in the Yankee Companies as of December 31, 2012 and 2011 were as follows:

The total carrying values of CL&P's, NSTAR Electric's, PSNH's and WMECO's ownership interests in CYAPC, YAEC and MYAPC, which are included in Other Long-Term Assets on their respective accompanying consolidated balance sheets are as follows:

	As of December 31,
(Millions of Dollars)	2012		2011⁽¹⁾
CL&P	$	1.4	$	1.4
NSTAR Electric		0.6		0.6
PSNH		0.3		0.3
WMECO		0.4		0.4

(1) The NSTAR Electric carrying value was not included in NU consolidated as of December 31, 2011.

For further information on the Yankee Companies, see Note 12C, "Commitments and Contingencies - Deferred Contractual Obligations," to the consolidated financial statements.

Other Investments: As of December 31, 2012, NU had a 37.2 percent (14.5 percent of which related to NSTAR Electric) equity ownership interest in two companies that transmit electricity imported from the Hydro-Québec system in Canada. Prior to the merger with NSTAR on April 10, 2012, NU had a 22.7 percent equity ownership interest in these companies. These investments are accounted for under the equity method of accounting. NU's investment totaled $6 million and $4.6 million as of December 31, 2012 and 2011, respectively, and NSTAR Electric's investment totaled $2.3 million and $3 million as of December 31, 2012 and 2011, respectively. The NSTAR Electric investment was not included in NU consolidated as of December 31, 2011. As of December 31, 2012 and 2011, NU also had an equity ownership interest of $6.8 million and $4.2 million in an energy investment fund, respectively.

Equity investments are included in Other Long-Term Assets on the accompanying consolidated balance sheets and net earnings related to these equity investments are included in Other Income, Net on the accompanying consolidated statements of income.

Regulated Companies: The Regulated companies' retail revenues are based on rates approved by the state regulatory commissions. In general, rates can only be changed through formal proceedings with the state regulatory commissions. The Regulated companies' rates are designed to recover their incurred costs, plus an allowed rate of return on certain unrecovered costs. The Regulated companies also utilize regulatory commission-approved tracking mechanisms to recover certain costs on a fully-reconciling basis. These tracking mechanisms require rates to be changed periodically, with overcollections refunded to customers or undercollections collected from customers in future periods. Beginning in 2011, WMECO was allowed to establish a revenue decoupling mechanism to recover a pre-established level of baseline distribution delivery service revenues per year, independent of actual customer usage. Such decoupling mechanisms effectively break the relationship between kWhs consumed by customers and revenues recognized.

Energy purchases under derivative instruments are recorded in Purchased Power, Fuel, and Transmission, and sales of energy associated with these purchases are recorded in Operating Revenues.

Regulated Companies' Unbilled Revenues: Because customers are billed throughout the month based on pre-determined cycles rather than on a calendar month basis, an estimate of electricity or natural gas delivered to customers for which the customers have not yet been billed is calculated as of the balance sheet date. Unbilled revenues are included in Operating Revenues on the consolidated statements of income and are assets on the consolidated balance sheets. Actual amounts billed to customers when meter readings become available may vary from the estimated amount.

The Regulated companies estimate unbilled sales monthly using the daily load cycle method. The daily load cycle method allocates billed sales to the current calendar month based on the daily load for each billing cycle. The billed sales are subtracted from total month load, net of delivery losses, to estimate unbilled sales. Unbilled revenues are estimated by first allocating unbilled sales to the respective customer classes, then applying an estimated rate by customer class to those sales.

Regulated Companies' Transmission Revenues - Wholesale Rates: Wholesale transmission revenues are based on formula rates that are approved by the FERC. Wholesale transmission revenues for CL&P, NSTAR Electric, PSNH, and WMECO are collected under the ISO New England Inc. Transmission, Markets and Services Tariff (ISO-NE Tariff). The ISO-NE Tariff includes Regional Network Service (RNS) and Schedule 21 - NU rate schedules to recover fees for transmission and other services for CL&P, PSNH and WMECO and the Schedule 21 - NSTAR rate schedules recover fees and other services for NSTAR Electric. The RNS rate, administered by ISO-NE and billed to all New England transmission users, including CL&P, NSTAR Electric, PSNH and WMECO's transmission businesses, is reset on June 1st of each year and recovers the revenue requirements associated with transmission facilities that benefit the entire New England region. The Schedule 21 - NU and Schedule 21 - NSTAR rates, administered by NU, recover the revenue requirements for local transmission facilities and other transmission costs not recovered under the RNS rate. The Schedule 21-NU rate is reset on January 1st and June 1st of each year, while the Schedule 21-NSTAR rate is reset on June 1st of each year. The Schedule 21 - NU and Schedule 21 - NSTAR rate calculations recover total transmission revenue requirements net of revenues received from other sources (i.e., RNS, rentals, etc.), thereby ensuring that NU recovers all of CL&P's, NSTAR Electric's, PSNH's and WMECO's regional and local revenue requirements as prescribed in the ISO-NE Tariff. The RNS and Schedule 21 - NU and Schedule 21 - NSTAR rates provide for the annual reconciliation and recovery or refund of estimated (or projected) costs to actual costs. The financial impacts of differences between actual and projected costs are deferred for future recovery from, or refunded to, transmission customers.

Regulated Companies' Transmission Revenues - Retail Rates: A significant portion of the NU transmission segment revenue comes from ISO-NE charges to the distribution businesses of CL&P, NSTAR Electric, PSNH and WMECO, each of which recovers these costs through rates charged to their retail customers. CL&P, NSTAR Electric, PSNH and WMECO each have a retail transmission cost tracking mechanism as part of their rates, which allows the electric distribution companies to charge their retail customers for transmission costs on a timely basis.

Costs related to fuel (and natural gas costs as it related to Yankee Gas and NSTAR Gas) included in Purchased Power, Fuel and Transmission on the accompanying consolidated statements of income were as follows:

	For the Years Ended December 31,
(Millions of Dollars)	2012⁽¹⁾		2011		2010
NU	$	346.8	$	307.9	$	391.6
PSNH		103.4		115.9		184.3
Yankee Gas		145.9		191.3		206.4
NSTAR Gas		97.2		N/A		N/A

⁽¹⁾ Includes the NSTAR Gas costs from the date of the merger, April 10, 2012, through December 31, 2012.

AFUDC represents the cost of borrowed and equity funds used to finance construction and is included in the cost of the Regulated companies' utility plant. The portion of AFUDC attributable to borrowed funds is recorded as a reduction of Other Interest Expense, and the AFUDC related to equity funds is recorded as Other Income, Net on the accompanying consolidated statements of income. AFUDC costs are recovered from customers over the service life of the related plant in the form of increased revenue collected as a result of higher depreciation expense.

NU		For the Years Ended December 31,
(Millions of Dollars, except percentages)		2012		2011		2010
AFUDC:
	Borrowed Funds	$	5.3	$	11.8	$	10.2
	Equity Funds		6.8		22.5		16.7
Total		$	12.1	$	34.3	$	26.9
Average AFUDC Rate			3.7%		7.3%		7.1%

		For the Years Ended December 31,
		2012								2011								2010
(Millions of Dollars,				NSTAR								NSTAR								NSTAR
except percentages)		CL&P		Electric⁽¹⁾		PSNH		WMECO		CL&P		Electric⁽¹⁾		PSNH		WMECO		CL&P		Electric⁽¹⁾		PSNH		WMECO
AFUDC:
	Borrowed Funds	$	2.5	$	0.3	$	1.6	$	0.5	$	3.3	$	0.2	$	7.1	$	0.5	$	2.7	$	0.1	$	6.6	$	0.3
	Equity Funds		1.9		-		1.9		1.0		6.0		-		13.2		1.0		4.9		-		10.4		0.6
Total		$	4.4	$	0.3	$	3.5	$	1.5	$	9.3	$	0.2	$	20.3	$	1.5	$	7.6	$	0.1	$	17.0	$	0.9
Average AFUDC Rate			3.6%		0.4%		5.9%		6.8%		8.3%		0.3%		7.1%		7.4%		8.3%		0.3%		6.8%		6.4%

The Regulated companies' average AFUDC rate is based on a FERC-prescribed formula that produces an average rate using the cost of a company's short-term financings as well as a company's capitalization (preferred stock, long-term debt and common equity). The average rate is applied to average eligible CWIP amounts to calculate AFUDC.

Items included within Other Income, Net on the accompanying consolidated statements of income primarily consist of investment income/(loss), interest income, AFUDC related to equity funds and equity in earnings. For CL&P, NSTAR Electric, PSNH and WMECO, equity in earnings relate to investments in CYAPC, YAEC and MYAPC and also NSTAR Electric's investment in two regional transmission companies, which are all accounted for on the equity method. On an NU consolidated basis, equity in earnings relate to the investment in MYAPC and NU's investment in two regional transmission companies.

Gross receipts taxes levied by the state of Connecticut are collected by CL&P and Yankee Gas from their respective customers. These gross receipts taxes are shown on a gross basis with collections in Operating Revenues and payments in Taxes Other Than Income Taxes on the accompanying consolidated statements of income as follows:

	For the Years Ended December 31,
(Millions of Dollars)	2012		2011		2010
NU	$	135.0	$	137.8	$	143.7
CL&P		120.7		121.6		128.0

Certain sales taxes are also collected by CL&P, NSTAR Electric, WMECO, Yankee Gas and NSTAR Gas from their respective customers as agents for state and local governments and are recorded on a net basis with no impact on the accompanying consolidated statements of income.

P.		Supplemental Cash Flow Information

NU			As of and For the Years Ended December 31,
(Millions of Dollars)			2012		2011		2010
Cash Paid/(Received) During the Year for:
	Interest, Net of Amounts Capitalized		$	356.5	$	256.3	$	258.3
	Income Taxes			(12.8)		(76.6)		84.5
Non-Cash Investing Activities:
	Plant Additions Included in Accounts Payable (As of)			160.6		168.5		127.9

		As of and For the Years Ended December 31,
		2012								2011								2010
				NSTAR								NSTAR								NSTAR
(Millions of Dollars)		CL&P		Electric ⁽¹⁾		PSNH		WMECO		CL&P		Electric ⁽¹⁾		PSNH		WMECO		CL&P		Electric ⁽¹⁾		PSNH		WMECO
Cash Paid/(Received) During
	the Year for:
	Interest, Net of Amounts
	Capitalized	$	129.4	$	94.6	$	49.8	$	25.8	$	136.6	$	96.1	$	49.3	$	22.1	$	142.2	$	95.8	$	51.4	$	20.2
	Income Taxes		(42.0)		88.1		14.7		(8.4)		(27.5)		(62.2)		(29.0)		(4.9)		71.5		147.6		1.6		5.0
Non-Cash Investing Activities:
	Plant Additions Included in
	Accounts Payable (As of)		42.8		50.0		16.8		30.0		32.7		34.3		51.1		61.3		46.2		16.7		35.8		21.2

The merger of NU with NSTAR on April 10, 2012 represented a significant non-cash transaction. Refer to Note 2, "Merger of NU and NSTAR," for further information on the purchase price of NSTAR.

NUSCO and NSTAR Electric & Gas, NU's service companies, provide centralized accounting, administrative, engineering, financial, information technology, legal, operational, planning, purchasing, and other services to NU's companies. RRR, Renewable Properties, Inc. and Properties, Inc., three other NU subsidiaries, construct, acquire or lease some of the property and facilities used by NU's companies.

As of both December 31, 2012 and 2011, CL&P, PSNH and WMECO had long-term receivables from NUSCO in the amounts of $25 million, $3.8 million and $5.5 million, respectively, which were included in Other Long-Term Assets on the accompanying consolidated balance sheets. These amounts related to the funding of investments held in trust by NUSCO in connection with certain postretirement benefits for CL&P, PSNH and WMECO employees and have been eliminated in consolidation on the NU financial statements.

NSTAR Electric's consolidated balance sheets included $70.2 million and $75.9 million in Payable to Affiliated Companies as of December 31, 2012 and 2011, respectively. These amounts related to payments received from affiliates as a result of NSTAR Electric's role as the sponsor of the NSTAR Pension Plan.

Included in the CL&P, NSTAR Electric, PSNH and WMECO consolidated balance sheets as of December 31, 2012 and 2011 were Accounts Receivable from Affiliated Companies and Accounts Payable to Affiliated Companies relating to transactions between CL&P, NSTAR Electric, PSNH and WMECO and other subsidiaries that are wholly owned by NU. These amounts have been eliminated in consolidation on the NU financial statements.

The NU Foundation is an independent not-for-profit charitable entity designed to fund initiatives or entities that emphasize economic development, workforce training and education, and a clean and healthy environment. The NSTAR Foundation is an independent not-for-profit entity designed to support local charitable organizations in NSTAR's service territory that improve the quality of life for its customers. The Board of Directors of both the NU Foundation and NSTAR Foundation consist of certain NU officers. The NU Foundation and the NSTAR Foundation are not included in the consolidated financial statements of NU as they are not-for-profit entities and the Company does not have title to the Foundations' assets and cannot receive contributions back from the Foundations.