On April 10, 2012, NSTAR's regulated utility subsidiaries, NSTAR Electric and NSTAR Gas, became subsidiaries of NU. For NSTAR Electric, certain regulatory asset and liability balances as of December 31, 2011 have been reclassified to the current year presentation in order to align the reporting of regulatory activities subsequent to the closing of the merger.

NU's Regulated companies continue to be rate-regulated on a cost-of-service basis; therefore, the accounting policies of the Regulated companies apply GAAP applicable to rate-regulated enterprises and reflect the effects of the rate-making process.

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

NU	As of December 31,
(Millions of Dollars)	2012		2011
Benefit Costs	$	2,452.1	$	1,360.5
Regulatory Assets Offsetting Derivative Liabilities		885.6		939.6
Goodwill		537.6		-
Storm Restoration Costs		547.7		356.0
Income Taxes, Net		516.2		425.4
Securitized Assets		232.6		101.8
Contractual Obligations		217.6		100.9
Power Contracts Buy Out Agreements		92.9		8.6
Regulatory Tracker Deferrals		190.1		45.9
Asset Retirement Obligations		88.8		47.5
Other Regulatory Assets		76.2		136.6
Total Regulatory Assets	$	5,837.4	$	3,522.8
Less: Current Portion	$	705.0	$	255.1
Total Long-Term Regulatory Assets	$	5,132.4	$	3,267.7

		As of December 31,
		2012								2011
				NSTAR								NSTAR
(Millions of Dollars)		CL&P		Electric		PSNH		WMECO		CL&P		Electric⁽¹⁾		PSNH		WMECO
Benefit Costs		$	563.2	$	781.2	$	223.7	$	116.0	$	572.8	$	813.7	$	200.0	$	118.9
Regulatory Assets Offsetting
	Derivative Liabilities		866.2		14.9		-		3.0		932.0		3.4		-		7.3
Goodwill			-		461.5		-		-		-		478.9		-		-
Storm Restoration Costs			413.9		55.8		34.5		43.5		268.3		30.6		44.0		43.7
Income Taxes, Net			367.5		47.1		36.2		31.0		339.6		48.8		38.0		17.8
Securitized Assets			-		205.1		19.7		7.8		-		368.5		76.4		25.4
Contractual Obligations			64.0		22.8		-		14.9		80.9		30.8		-		20.0
Power Contracts Buy Out Agreements			-		85.9		7.0		-		-		109.5		8.6		-
Regulatory Tracker Deferrals			12.2		71.4		49.3		31.9		5.5		61.1		11.9		22.1
Asset Retirement Obligations			29.4		29.4		14.2		3.5		27.9		24.5		13.5		3.2
Other Regulatory Assets			27.9		16.9		29.4		12.6		47.0		34.7		35.7		10.3
Total Regulatory Assets		$	2,344.3	$	1,792.0	$	414.0	$	264.2	$	2,274.0	$	2,004.5	$	428.1	$	268.7
Less: Current Portion		$	185.9	$	347.1	$	62.9	$	42.4	$	170.2	$	323.9	$	34.2	$	35.5
Total Long-Term Regulatory Assets		$	2,158.4	$	1,444.9	$	351.1	$	221.8	$	2,103.8	$	1,680.6	$	393.9	$	233.2

Regulatory Costs Not Yet Approved: Additionally, the Regulated companies had $69.9 million ($3.9 million for CL&P, $25.4 million for NSTAR Electric, $35.7 million for PSNH, and $1.4 million for WMECO) and $32.4 million ($5 million for CL&P, $22.4 million for PSNH, and $1.6 million for WMECO) of regulatory costs as of December 31, 2012 and 2011, respectively, which were included in Other Long-Term Assets on the accompanying consolidated balance sheets. For comparative purposes, NSTAR Electric had $9.5 million of such regulatory costs as of December 31, 2011. These amounts represent incurred costs that have not yet been approved for recovery by the applicable regulatory agency. Management believes it is probable that recovery of these costs will ultimately be approved.

For PSNH, of the total December 31, 2012 regulatory costs not yet approved, $12.1 million related to costs incurred for the 2012 Hurricane Sandy storm and $22.3 million related to costs incurred for the 2011 Tropical Storm Irene and the October snowstorm restorations that met the NHPUC criteria for cost deferral. As of December 31, 2011, the storm restoration costs incurred for the 2011 Tropical Storm Irene and the October snowstorm restorations totaled $21.7 million. Refer to the "Storm Restoration Costs" section below for further discussion. The NSTAR Electric balance as of December 31, 2012 and 2011 related to costs deferred in connection with the basic service bad debt adder. See Note 12H, "Commitments and Contingencies – Basic Service Bad Debt Adder," for further information.

Equity Return on Regulatory Assets: For rate-making purposes, the Regulated companies recover the carrying cost, including an allowed equity return, on certain regulatory assets. This equity return, which is not recorded on the accompanying consolidated balance sheets, totaled $2.5 million and $3.5 million for CL&P and $21.8 million and $7.6 million for PSNH as of December 31, 2012 and 2011, respectively. These carrying costs will be recovered in future rates.

Regulatory Assets - The following provides further information about regulatory assets:

Benefit Costs: NU's Pension, SERP and PBOP Plans are accounted for in accordance with accounting guidance on defined benefit pension and other postretirement plans. Under this accounting guidance, the funded status of pension and other postretirement plans is recorded with an offset to Accumulated Other Comprehensive Income/(Loss) and is remeasured annually. However, because the Regulated companies recover these costs from customers through rates, regulatory assets are recorded as an offset for the liability that is recognized for the funded status of the pension and postretirement plans. Regulatory accounting was also applied to the portions of the NUSCO and NSTAR Electric & Gas costs that support the Regulated companies, as these amounts are also recoverable. CL&P and PSNH do not collect carrying charges on these deferred benefit costs regulatory assets. WMECO's deferred benefit costs regulatory assets are earning a return at the same rate as the assets included in rate base. NSTAR Electric does not earn a return on the regulatory assets recorded to offset the funded status.

NSTAR Electric and WMECO each recover their qualified pension and postretirement expenses through rate reconciling mechanisms that fully track the change in net pension and postretirement expenses each year. CL&P and PSNH will recover benefit costs through rates as allowed by their applicable regulatory commissions. NSTAR Electric earns a carrying charge on the excess cumulative benefit plan trust fund contributions it has made over what it has cumulatively recognized as net periodic benefit expense, net of deferred income taxes. As of December 31, 2012 and 2011, these balances were $366.8 million and $428 million of the benefit costs regulatory asset, respectively.

Regulatory Assets Offsetting Derivative Liabilities: The regulatory assets offsetting derivative liabilities relate to the fair value of contracts used to purchase power and other related contracts that will be collected from customers in the future. See Note 5, "Derivative Instruments," to the consolidated financial statements for further information. These assets are excluded from rate base and are being recovered as the actual settlement occurs over the duration of the contracts.

Goodwill: Goodwill that originated from the merger that created NSTAR in 1999 is recoverable in rates over the remaining 27 year amortization period, without a carrying charge.

Storm Restoration Costs: The storm restoration cost deferrals relate to costs incurred at CL&P, NSTAR Electric, PSNH and WMECO for restorations that the Company expects to collect from customers. A storm must meet certain criteria to be declared a major storm with the criteria specific to each state jurisdiction and utility company. Once a storm is declared major, all qualifying expenses incurred during storm restoration efforts, if deemed prudent, are deferred and recovered from customers in future periods. In Connecticut, qualifying storm restoration costs must exceed $5 million for a storm to be declared a major storm. In Massachusetts, qualifying storm restoration costs must exceed $1 million for NSTAR Electric and $300,000 for WMECO and an emergency response plan must be initiated for a storm to be declared a major storm. In New Hampshire, (1) at least 10 percent of customers must be without power with at least 200 concurrent locations requiring repairs (trouble spots), or (2) at least 300 concurrent trouble spots must be reported for a storm to be declared a major storm.

In 2011, Tropical Storm Irene and the October snowstorm each caused extensive damage to NU's distribution system. As of December 31, 2012 and 2011, CL&P had recorded total deferred storm restoration costs relating to Tropical Storm Irene and the October 2011 snowstorm as a regulatory asset of $281.6 million and $263.3 million, respectively. The CL&P storm restoration cost regulatory asset balance includes a reserve of $40 million recorded in connection with the Connecticut settlement agreement. See Note 2, "Merger of NU and NSTAR," for further information. As of December 31, 2012 and 2011, NSTAR Electric had recorded total deferred storm restoration costs for these 2011 storms of $35.8 million and $35.8 million, respectively, and WMECO had recorded $26.5 million and $26.7 million, respectively, as regulatory assets. PSNH recorded $22.3 million and $21.7 million for these 2011 storms in Other Long-Term Assets, as of December 31, 2012 and 2011, respectively, as previously described.

On August 1, 2012, PURA issued a final decision in the investigation of CL&P's performance related to both Tropical Storm Irene and the October 2011 snowstorm. The decision concluded that CL&P was deficient and inadequate in its preparation, response, and communication to both storms, and identified certain penalties that could be imposed on CL&P during its next rate case, including a reduction in allowed regulatory ROE and the disallowance of certain deferred storm restoration costs. However, PURA will consider and weigh the extent to which CL&P has taken steps in its restructuring of storm management and the establishment of new practices for execution in future storm response in determining any potential penalties. CL&P believes such steps to improve current storm preparation and response practices have been successfully executed in recent storms. At this time, management cannot estimate the impact on CL&P's financial position, results of operations or cash flows. CL&P continues to believe that its response to these 2011 storms was prudent, was consistent with industry standards, and that it is probable that it will be able to recover its deferred costs.

See Note 12E, "Commitments and Contingencies – DPU Penalties for 2011 Storm Responses," for a discussion of NSTAR Electric and WMECO's 2011 storm response.

On October 29, 2012, Hurricane Sandy caused extensive damage to NU's electric distribution system across all three states. The cost of restoration that was deferred for future recovery from customers and recorded as a regulatory asset as of December 31, 2012 for CL&P, NSTAR Electric, and WMECO totaled $159.9 million, $27.8 million and $4.2 million, respectively. PSNH recorded $12.1 million in Other-Long Term Assets, as previously described. Management believes its response to the storm damage was prudent and therefore believes it is probable that CL&P, NSTAR Electric, PSNH and WMECO will be allowed to recover these deferred storm restoration costs. Accordingly, the storm did not have a material impact to the results of operations of CL&P, NSTAR Electric, PSNH or WMECO. Each operating company will seek recovery of these deferred storm restoration costs through its applicable regulatory recovery process.

The PSNH storm restoration costs deferral as of December 31, 2012 and 2011 related to costs incurred for a major storm in December 2008 and the February 2010 wind storm, both of which were approved for recovery and are included in rate base.

Income Taxes, Net: The tax effect of temporary book-tax differences (differences between the periods in which transactions affect income in the financial statements and the periods in which they affect the determination of taxable income, including those differences relating to uncertain tax positions) is accounted for in accordance with the rate-making treatment of the applicable regulatory commissions and accounting guidance for income taxes. Differences in income taxes between the accounting guidance and the rate-making treatment of the applicable regulatory commissions are recorded as regulatory assets. As these assets are offset by deferred income tax liabilities, no carrying charge is collected. For further information regarding income taxes, see Note 11, "Income Taxes," to the consolidated financial statements.

Securitized Assets: In March 2005, NSTAR Electric issued $674.5 million RRBs and used the majority of the proceeds from that issuance to effect purchase power contract buyouts. The collateralized amounts reflected as securitized regulatory assets for NSTAR Electric as of December 31, 2012 and 2011 were $14.1 million and $98.4 million, respectively. In April 2001, PSNH issued $525 million RRBs and used the majority of the proceeds from that issuance to buydown its power contracts with an affiliate, North Atlantic Energy Corporation. In May 2001, WMECO issued $155 million RRBs and used the majority of the proceeds from that issuance to buyout an IPP contract. These assets are not earning an equity return and are being recovered over the amortization period of their associated RRBs. NSTAR Electric RRBs are scheduled to fully amortize by March 15, 2013, PSNH RRBs are scheduled to fully amortize by May 1, 2013, and WMECO RRBs are scheduled to fully amortize by June 1, 2013.

NSTAR Electric's remaining balance primarily includes other costs related to purchase power contract divestitures and certain costs related to NSTAR Electric's former generation business that are recovered with a return through the transition charge and amounted to $186.1 million and $259.8 million as of December 31, 2012 and 2011, respectively. These cost recoveries primarily occur through September 2016 for NSTAR Electric and are subject to adjustment by the DPU.

Contractual Obligations: Under the terms of contracts with CYAPC, YAEC and MYAPC, CL&P, NSTAR Electric, PSNH and WMECO are responsible for their proportionate share of the remaining costs of the nuclear facilities, including decommissioning. A portion of these amounts was recorded as contractual obligations regulatory assets. These obligations for CL&P are earning a return and are being recovered through the CTA. Amounts for NSTAR Electric are being recovered without a return through the transition charge and are anticipated to be recovered by 2015. Amounts for WMECO are being recovered without a return and are anticipated to be recovered by 2013, the scheduled completion date of stranded cost recovery. Amounts for PSNH were fully recovered by 2006. As a result of the April 10, 2012 merger with NSTAR and consolidation of CYAPC and YAEC, NU's regulatory asset balance also includes the regulatory assets of CYAPC and YAEC, which amounted to $214 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 are eliminated in consolidation.

Power Contracts Buy Out Agreements: NSTAR Electric's balance represents the recorded contract termination liability related to certain purchase power contract buy out agreements that NSTAR Electric executed in 2004 and their future recovery through NSTAR Electric's transition charge. NSTAR Electric does not earn a return on this regulatory asset. The contracts' termination payments will occur over time and will be collected from customers through NSTAR Electric's transition charge over the same time period. The cost recovery period of these terminated contracts is through September 2016. PSNH's balance represents payments associated with the termination of various power purchase contracts that were recorded as regulatory assets and are amortized over the remaining life of the contracts.

Regulatory Tracker Deferrals: Regulatory tracker deferrals are approved rate mechanisms that allow utilities to recover costs in specific business segments through reconcilable tracking mechanisms that are reviewed at least annually by the applicable regulatory commission. The reconciliation process produces deferrals for future recovery or refund, which can be either under or over-collections to be included in future customer rates each year. Regulatory tracker deferrals are recorded as regulatory assets if costs are in excess of collections from customers and are recorded as regulatory liabilities if collections from customers are in excess of costs. All material regulatory tracker deferrals that are in a regulatory asset position are earning a return. The following regulatory reconciliation mechanisms were recorded as either regulatory assets or liabilities as of December 31, 2012 and 2011:

CL&P: The PURA has established several reconciliation mechanisms, which allow CL&P to recover costs associated with the procurement of energy for SS and LRS, congestion and other costs associated with power market rules approved by the FERC or as approved by the PURA, C&LM programs, the retail transmission of energy, certain regulatory and energy public policy costs, such as hardship protection costs and transition period property taxes, and stranded costs, such as the amortization of regulatory assets and IPP over market costs. As part of the CTA mechanism reconciliation process, CL&P had also established an obligation to refund the variable incentive portion of its transition service procurement fee, which totaled $26.3 million as of December 31, 2011 and was recorded as a regulatory liability. During 2012, PURA issued a decision approving a joint settlement agreement submitted October 2, 2012, by CL&P, UI, and the Connecticut Consumer Counsel, in resolution of all issues associated with the procurement incentive for 2004, 2005 and 2006. Under the joint settlement agreement, CL&P refunded to customers $5.7 million of funds collected and associated interest. CL&P will be allowed to retain approximately $11.5 million of procurement incentive along with the remaining accrued interest that it was not required to refund to customers.

NSTAR Electric and WMECO: Each company recovers certain of its costs on a fully reconciling basis through DPU-approved cost recovery mechanisms. These rate mechanisms recover costs associated with the procurement of energy for basic service, the retail transmission of energy, costs associated with electric industry restructuring, pension and postretirement benefits, and energy efficiency programs. Costs associated with industry restructuring include RRB debt service, nuclear decommissioning costs and above-market IPP costs. In addition, WMECO recovers costs associated with its investments in renewable energy, such as solar projects and credits given to customers who generate renewable energy.

In the January 31, 2011 rate case, WMECO received approval for a revenue decoupling reconciliation mechanism, which provides assurance that WMECO will recover a DPU pre-established level of baseline distribution delivery service revenue to manage all other distribution operating expenses and earn a level of return on its capital investment.

PSNH: The NHPUC permits PSNH to recover the costs of providing generation, restructuring costs as a result of deregulation, the retail transmission of energy, and the cost of C&LM programs through various reconciliation mechanisms.

Asset Retirement Obligations: The costs associated with the depreciation of the Regulated companies' ARO assets and accretion of the ARO liabilities are recorded as regulatory assets in accordance with regulatory accounting guidance. For CL&P, NSTAR Electric and WMECO, ARO assets, regulatory assets and liabilities offset and are excluded from rate base. PSNH's ARO assets, regulatory assets and liabilities are included in rate base. These costs are being recovered over the life of the underlying property, plant and equipment.

Other Regulatory Assets: Other Regulatory Assets primarily include environmental remediation costs, losses associated with the reacquisition or redemption of long-term debt, and costs related to previously recognized lost tax benefits as a result of a provision in the 2010 Healthcare Act that eliminated the tax deductibility of actuarially equivalent Medicare Part D benefits for retirees, partially offset by purchase price adjustments recorded in connection with the merger with NSTAR reflected in regulatory assets.

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

NU	As of December 31,
(Millions of Dollars)	2012		2011
Cost of Removal	$	440.8	$	172.2
Regulatory Tracker Deferrals		95.1		139.1
AFUDC Transmission Incentive		70.0		67.0
Spent Nuclear Fuel Costs and Contractual Obligations		15.4		15.4
Other Regulatory Liabilities		53.0		40.2
Total Regulatory Liabilities	$	674.3	$	433.9
Less: Current Portion	$	134.1	$	167.8
Total Long-Term Regulatory Liabilities	$	540.2	$	266.1

		As of December 31,
		2012										2011
				NSTAR									NSTAR
(Millions of Dollars)		CL&P		Electric		PSNH		WMECO		CL&P			Electric⁽¹⁾		PSNH		WMECO
Cost of Removal		$	44.2	$	240.3	$	51.2	$	-	$	63.8		$	235.8	$	53.2	$	7.2
Regulatory Tracker Deferrals			39.1		14.4		20.4		13.7		94.4			11.7		17.3		21.3
AFUDC Transmission Incentive			56.6		4.1		-		9.3		57.7			4.3		-		9.3
Spent Nuclear Fuel Costs and
	Contractual Obligations		15.4		-		-		-		15.4			-		-		-
Wholesale Transmission Overcollections			-		-		-		5.3		4.5			-		2.6		9.5
Other Regulatory Liabilities			1.1		32.9		3.8		2.4		11.8			29.7		5.8		2.4
Total Regulatory Liabilities		$	156.4	$	291.7	$	75.4	$	30.7	$	247.6		$	281.5	$	78.9	$	49.7
Less: Current Portion		$	32.1	$	47.5	$	23.0	$	21.0	$	108.3		$	41.6	$	24.5	$	33.1
Total Long-Term Regulatory Liabilities		$	124.3	$	244.2	$	52.4	$	9.7	$	139.3		$	239.9	$	54.4	$	16.6

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

Cost of Removal: NU's Regulated companies currently recover amounts in rates for future costs of removal of plant assets over the lives of the assets. The estimated cost to remove utility assets from service is recognized as a component of depreciation expense and the cumulative amounts collected from customers but not yet expended is recognized as a regulatory liability. Expended costs that exceed amounts collected from customers are recognized as regulatory assets, as they are probable of recovery in future rates.

AFUDC Transmission Incentive: AFUDC was recorded on 100 percent of CL&P and WMECO's CWIP for their NEEWS projects through May 31, 2011, all of which was reserved as a regulatory liability to reflect rate base recovery for 100 percent of the CWIP as a result of FERC-approved transmission incentives. Effective June 1, 2011, FERC approved changes to the ISO-NE Tariff in order to include 100 percent of the NEEWS CWIP in regional rate base. As a result, CL&P and WMECO no longer record AFUDC on NEEWS CWIP. NSTAR Electric recorded AFUDC on reliability-related projects over $5 million through December 31, 2012, 50 percent of which was reserved as a regulatory liability to reflect rate base recovery for 50 percent of the CWIP as a result of FERC-approved transmission incentives.

Spent Nuclear Fuel Costs and Contractual Obligations: CL&P and WMECO currently recover amounts in rates for costs of disposal of spent nuclear fuel and high-level radioactive waste for the period prior to the sale of their ownership shares in the Millstone nuclear power stations. Collections in excess of these costs are recorded as regulatory liabilities. CL&P has also established a regulatory liability for the overrecovery of its proportionate share of the remaining costs, including decommissioning, of the MYAPC nuclear facility.

Wholesale Transmission Overcollections: CL&P, NSTAR Electric, PSNH and WMECO's transmission rates recover total transmission revenue requirements, recovering all regional and local revenue requirements for providing transmission service. These rates provide for annual reconciliations to actual costs and the difference between billed and actual costs is deferred. Regulatory liabilities are recorded for collections in excess of costs. Regulatory assets are recorded for costs in excess of collections, as they are probable of recovery in future rates.

Other Regulatory Liabilities: Other Regulatory Liabilities primarily includes amounts that are subject to various rate reconciling mechanisms that, as of each period end date, would result in refunds to customers.