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 reflect 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.

NU	As of December 31,
(Millions of Dollars)	2013		2012
Benefit Costs	$	1,240.2	$	2,452.1
Derivative Liabilities		638.0		885.6
Goodwill		525.9		537.6
Storm Restoration Costs		589.6		547.7
Income Taxes, Net		626.2		516.2
Securitized Assets		-		232.6
Contractual Obligations - Yankee Companies		154.2		217.6
Buy Out Agreements for Power Contracts		70.2		92.9
Regulatory Tracker Mechanisms		323.4		190.1
Other Regulatory Assets		126.8		165.0
Total Regulatory Assets		4,294.5		5,837.4
Less: Current Portion		535.8		705.0
Total Long-Term Regulatory Assets	$	3,758.7	$	5,132.4

		As of December 31,
		2013								2012
				NSTAR								NSTAR
(Millions of Dollars)		CL&P		Electric		PSNH		WMECO		CL&P		Electric		PSNH		WMECO
Benefit Costs		$	297.7	$	496.7	$	100.6	$	57.3	$	563.2	$	781.2	$	223.7	$	116.0
Derivative Liabilities			630.4		7.7		-		-		866.2		14.9		-		3.0
Goodwill			-		451.5		-		-		-		461.5		-		-
Storm Restoration Costs			397.8		109.3		43.7		38.8		413.9		55.8		34.5		43.5
Income Taxes, Net			415.5		84.0		40.3		43.7		367.5		47.1		36.2		31.0
Securitized Assets			-		-		-		-		-		205.1		19.7		7.8
Contractual Obligations -
	Yankee Companies		19.8		6.2		-		4.5		64.0		22.8		-		14.9
Buy Out Agreements for Power Contracts			-		64.7		5.5		-		-		85.9		7.0		-
Regulatory Tracker Mechanisms			8.0		169.5		83.3		32.6		12.2		71.4		49.3		31.9
Other Regulatory Assets			44.8		49.7		38.1		12.2		57.3		46.3		43.6		16.1
Total Regulatory Assets			1,814.0		1,439.3		311.5		189.1		2,344.3		1,792.0		414.0		264.2
Less: Current Portion			150.9		204.1		92.2		43.0		185.9		347.1		62.9		42.4
Total Long-Term Regulatory Assets		$	1,663.1	$	1,235.2	$	219.3	$	146.1	$	2,158.4	$	1,444.9	$	351.1	$	221.8

Regulatory Costs in Other Long-Term Assets: The Regulated companies had $65.1 million ($7.3 million for CL&P, $33.4 million for NSTAR Electric, and $10.1 million for WMECO) and $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) of additional regulatory costs as of December 31, 2013 and 2012, 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.

The PSNH balance as of December 31, 2012 primarily related to storm restoration costs incurred for Tropical Storm Irene, the October 2011 snowstorm and Storm Sandy that met the NHPUC criteria for cost deferral and recovery. Refer to the "Storm Restoration Costs" section in this Note for further discussion. The NSTAR Electric balance as of December 31, 2013 and 2012 primarily related to costs deferred in connection with the basic service bad debt adder. See Note 12G, "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 related to their regulatory assets. For certain regulatory assets, the carrying cost recovered includes an equity return component. This equity return, which is not recorded on the balance sheets, totaled $1.9 million and $2.5 million for CL&P and $33.1 million and $21.8 million for PSNH as of December 31, 2013 and 2012, respectively. These carrying costs will be recovered from customers 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. Because the Regulated companies recover the retiree benefit costs from customers through rates, regulatory assets are recorded in lieu of a charge to Accumulated Other Comprehensive Income/(Loss) to reflect the liability that is recognized for the funded status of the pension and other postretirement plans and is remeasured annually. Regulatory accounting was also applied to the portions of NU's service company costs that support the Regulated companies, as these amounts are also recoverable. CL&P, NSTAR Electric, PSNH and WMECO do not collect carrying charges on these benefit costs regulatory assets.

CL&P, NSTAR Electric, PSNH and WMECO recover benefit costs related to their distribution and transmission operations from customers in rates as allowed by their applicable regulatory commissions. NSTAR Electric and WMECO each recover their qualified pension and postretirement expenses related to distribution operations through rate reconciling mechanisms that fully track the change in net pension and postretirement expenses each year. 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, 2013 and 2012, these balances were $379.9 million and $366.8 million of the total benefit costs regulatory asset, respectively.

Derivative Liabilities: Regulatory assets recorded as an offset to derivative liabilities relate to the fair value of contracts used to purchase energy and energy-related products that will be recovered from customers in future rates. See Note 5, "Derivative Instruments," to the financial statements for further information. These assets are excluded from rate base and are being recovered as the actual settlements occur over the duration of the contracts.

Goodwill: The goodwill regulatory asset originated from the transaction that created NSTAR in 1999. This regulatory asset is currently being amortized and recovered from customers in rates without a carrying charge over a 40-year period (as of December 31, 2013, there were 26 years of amortization remaining).

Storm Restoration Costs: The storm restoration cost deferrals relate to costs incurred at CL&P, NSTAR Electric, PSNH and WMECO that each company expects to recover 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 as follows:

Once a storm is declared major, all qualifying expenses prudently incurred during storm restoration efforts are deferred and recovered from customers.

In addition to storm restoration costs, PSNH is allowed recovery of prudently incurred storm pre-staging costs in accordance with NHPUC regulation.

In 2013, 2012 and 2011, CL&P, NSTAR Electric, PSNH and WMECO experienced significant storms, including Tropical Storm Irene, the October 2011 snowstorm, Storm Sandy, and the February 2013 blizzard. As a result of these storm events, each Company suffered extensive damage to its distribution and transmission systems resulting in customer outages, which required the incurrence of costs to repair damage and restore customer service. The storm restoration cost regulatory asset balance at CL&P, NSTAR Electric, PSNH and WMECO reflects costs incurred for major storm events. Management believes the storm restoration costs were prudent and meet the criteria for specific cost recovery in Connecticut, Massachusetts and New Hampshire and as a result, are probable of recovery.

Storm Filings: Each electric utility is seeking recovery of its deferred storm restoration costs through its applicable regulatory recovery process.

On February 3, 2014, the PURA issued a draft decision on CL&P's request to recover storm restoration costs associated with five major storms, all of which occurred in 2011 and 2012. In its draft decision, the PURA approved recovery of $365 million of deferred storm restoration costs and ordered CL&P to capitalize approximately $18 million of the deferred storm restoration costs as utility plant, which will be included in depreciation expense in future rate proceedings. PURA will allow recovery of the $365 million with carrying charges in CL&P's distribution rates over a six-year period beginning December 1, 2014. The remaining costs were either disallowed or are probable of recovery in future rates and did not have a material impact on CL&P's financial position, results of operations or cash flows.

On December 30, 2013, the DPU approved NSTAR Electric's request to recover storm restoration costs, plus carrying costs, related to Tropical Storm Irene and the October 2011 snowstorm. The DPU approved recovery of $34.2 million of the $38 million requested costs. NSTAR Electric will recover these costs, plus carrying costs, in its distribution rates over a five-year period beginning on January 1, 2014.

On June 27, 2013, the NHPUC approved an increase to PSNH's distribution rates effective July 1, 2013, which included a $5 million increase to the current level of funding for the major storm cost reserve. The major storm cost reserve is used to offset the storm restoration cost regulatory asset.

On August 30, 2013, WMECO submitted its 2013 Annual SRRCA filing to begin recovering the restoration costs associated with the October 2011 snowstorm and Storm Sandy. On December 20, 2013, the DPU approved the 2013 Annual SRRCA filing for effect on January 1, 2014, subject to further review and reconciliation.

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 financial statements.

Securitized Assets: NSTAR Electric's securitized regulatory asset balance primarily included costs related to purchase power contract divestitures and certain costs related to NSTAR Electric's former generation business that were recovered with a return through the transition charge and amounted to $186.1 million as of December 31, 2012. These costs were fully recovered from customers in 2013.

The securitized regulatory asset balance as of December 31, 2012 also included proceeds received from the issuance of RRBs at NSTAR Electric, PSNH and WMECO that were used to buy out or buy down purchase power contracts. The collateralized amounts reflected as securitized regulatory assets for NSTAR Electric, PSNH and WMECO as of December 31, 2012 were $14.1 million, $19.7 million and $7.8 million, respectively. As of December 31, 2013, NSTAR Electric's, PSNH's and WMECO's RRBs were fully redeemed and the related regulatory assets were fully recovered from customers.

Contractual Obligations - Yankee Companies: CL&P, NSTAR Electric, PSNH and WMECO are responsible for their proportionate share of the remaining costs of the CYAPC, YAEC and MYAPC nuclear facilities, including decommissioning. A portion of these amounts was recorded as a regulatory asset. Amounts for CL&P are earning a return and are being recovered through the CTA. Amounts for NSTAR Electric and WMECO are being recovered without a return through the transition charge. Amounts for PSNH were fully recovered in 2006. As a result of NU's consolidation of CYAPC and YAEC, NU's regulatory asset balance also includes the regulatory assets of CYAPC and YAEC, which totalled $129.8 million and $214 million as of December 31, 2013 and 2012, respectively. 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.

Buy Out Agreements for Power Contracts: NSTAR Electric's balance represents the contract termination liability related to certain purchase power contract buy out agreements that were executed in 2004. The contracts' termination payments occur through September 2016 and are collected from customers through NSTAR Electric's transition charge over the same period. Therefore, NSTAR Electric does not earn a return on this regulatory asset. 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 Mechanisms: The Regulated companies' approved rates are designed to recover their incurred costs to provide service to customers. The Regulated companies are permitted to recover certain of their costs on a fully-reconciling basis through regulatory commission-approved tracking mechanisms. The difference between the costs incurred (or the rate recovery allowed) and the actual revenues is recorded as regulatory assets (for undercollections) or regulatory liabilities (for overcollections) to be included in future customer rates each year. Carrying charges are recorded on all material regulatory tracker mechanisms.

CL&P, NSTAR Electric, PSNH and WMECO each recover the costs associated with the procurement of energy, transmission related costs from FERC-approved transmission tariffs, energy efficiency programs, low income assistance programs, and restructuring and stranded costs as a result of deregulation, on a fully reconciling basis. Energy procurement costs at PSNH include the costs related to its generating stations.

WMECO's distribution revenue is decoupled from its customer sales volume. WMECO reconciles its annual base distribution rate recovery to a pre-established level of baseline distribution delivery service revenue. Any difference between the allowed level of distribution revenue and the actual amount incurred in a calendar year is adjusted through rates in the following year.

Other Regulatory Assets: Other Regulatory Assets primarily include asset retirement obligations, environmental remediation costs, losses associated with the reacquisition or redemption of long-term debt and various other items, partially offset by purchase price adjustments recorded as Regulatory Assets in connection with the merger with NSTAR. The ARO costs associated with the depreciation of the Regulated companies' ARO assets and accretion of the ARO liabilities are recorded as regulatory assets. 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.

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

NU	As of December 31,
(Millions of Dollars)	2013		2012
Cost of Removal	$	435.1	$	440.8
Regulatory Tracker Mechanisms		151.2		95.1
AFUDC - Transmission		68.1		70.0
Other Regulatory Liabilities		52.9		68.4
Total Regulatory Liabilities		707.3		674.3
Less: Current Portion		204.3		134.1
Total Long-Term Regulatory Liabilities	$	503.0	$	540.2

	As of December 31,
	2013								2012
			NSTAR								NSTAR
(Millions of Dollars)	CL&P		Electric		PSNH		WMECO		CL&P		Electric		PSNH		WMECO
Cost of Removal	$	29.1	$	250.0	$	49.7	$	-	$	44.2	$	240.3	$	51.2	$	-
Regulatory Tracker Mechanisms		95.6		21.9		21.6		21.1		39.1		14.4		20.4		19.0
AFUDC - Transmission		54.7		4.1		-		9.3		56.6		4.1		-		9.3
Other Regulatory Liabilities		8.4		31.1		1.0		3.4		16.5		32.9		3.8		2.4
Total Regulatory Liabilities		187.8		307.1		72.3		33.8		156.4		291.7		75.4		30.7
Less: Current Portion		94.0		54.0		20.6		19.9		32.1		47.5		23.0		21.0
Total Long-Term Regulatory Liabilities	$	93.8	$	253.1	$	51.7	$	13.9	$	124.3	$	244.2	$	52.4	$	9.7

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: AFUDC was recorded by CL&P and WMECO 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, 2013, 50 percent of which was recorded as a regulatory liability to reflect rate base recovery for 50 percent of the CWIP as a result of FERC-approved transmission incentives.

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.