General: NU, CL&P, NSTAR Electric, PSNH and WMECO are subject to environmental laws and regulations intended to mitigate or remove the effect of past operations and improve or maintain the quality of the environment. These laws and regulations require the removal or the remedy of the effect on the environment of the disposal or release of certain specified hazardous substances at current and former operating sites. NU, CL&P, NSTAR Electric, PSNH and WMECO have an active environmental auditing and training program and believe that they are substantially in compliance with all enacted laws and regulations.

The number of environmental sites and reserves related to these sites for which remediation or long-term monitoring, preliminary site work or site assessment are being performed are as follows:

	As of September 30, 2014				As of December 31, 2013
			Reserve				Reserve
	Number of Sites		(in millions)		Number of Sites		(in millions)
NU		65	$	34.7		68	$	35.4
CL&P		16		4.0		18		3.4
NSTAR Electric		13		1.1		12		1.2
PSNH		13		5.3		15		5.4
WMECO		4		0.5		5		0.4

Included in the NU number of sites and reserve amounts above are former MGP sites that were operated several decades ago and manufactured gas from coal and other processes, which resulted in certain by-products remaining in the environment that may pose a potential risk to human health and the environment. The reserve balance related to these former MGP sites was $29.8 million and $31.4 million as of September 30, 2014 and December 31, 2013, respectively, and relates primarily to the natural gas business segment.

The following is an update to the current status of long-term contractual arrangements set forth in Note 12B of the NU 2013 Form 10-K.

Renewable Energy: Renewable energy contracts include non-cancelable commitments under contracts of CL&P, NSTAR Electric and WMECO for the purchase of energy and capacity from renewable energy facilities.

	October - December
(Millions of Dollars)	2014		2015		2016		2017		2018		Thereafter		Total
CL&P	$	20.0	$	60.7	$	66.1	$	67.0	$	67.7	$	717.0	$	998.5
NSTAR Electric		21.8		86.3		100.0		96.1		59.6		377.6		741.4
WMECO		-		-		2.4		2.4		2.4		28.9		36.1

Spent Nuclear Fuel Litigation – DOE Phase II Damages – On November 15, 2013, the Court of Federal Claims issued an award to CYAPC for $126.3 million, YAEC for $73.3 million and MYAPC for $35.8 million for lawsuits against the DOE seeking recovery of actual damages incurred in the years following 2001 and 2002 (DOE Phase II Damages). On January 14, 2014, the Yankee Companies received a letter from the U.S. Department of Justice stating that the DOE will not appeal the court's final judgment.

On March 28, 2014, CYAPC, YAEC and MYAPC received payment of $90 million, $73.3 million and $35.8 million, respectively, of the DOE Phase II Damages proceeds. On April 24, 2014, CYAPC received payment of the remaining $36.3 million proceeds. On April 28, 2014, the Yankee Companies made the required informational filing with FERC in accordance with the process and methodology outlined in the 2013 FERC order. The Yankee Companies returned the DOE Phase II Damages proceeds to the member companies, including CL&P, NSTAR Electric, PSNH, and WMECO, for the benefit of their respective customers, on June 1, 2014.

As of September 30, 2014, CL&P's refund obligation to customers of $65.4 million was recorded as an offset to the deferred storm restoration costs regulatory asset, as directed by PURA. NSTAR Electric's, PSNH's and WMECO's refund obligation to customers of $29.1 million, $13.1 million and $18.1 million, respectively, was recorded as a regulatory liability in each company's respective regulatory tracker mechanisms. Refunds to customers for these DOE proceeds began in the third quarter of 2014. For further information, see Note 2, "Regulatory Accounting," to the financial statements.

DOE Phase III Damages – On August 15, 2013, the Yankee Companies each filed subsequent lawsuits against the DOE seeking recovery of actual damages incurred in the years 2009 through 2012. Responsive pleading from the U.S. Department of Justice was filed on November 18, 2013, and discovery has begun.

DOE Phase I Damages - Proceeds Received – On September 17, 2014, in accordance with the MYAPC refund plan, MYAPC returned a portion of the DOE Phase I Damages proceeds to the member companies, including CL&P, NSTAR Electric, PSNH, and WMECO, in the amount of $3.2 million, $1.1 million, $1.4 million and $0.8 million, respectively. These amounts reduced receivables at CL&P, NSTAR Electric, PSNH and WMECO.

NU parent provides credit assurances on behalf of its subsidiaries, including CL&P, NSTAR Electric, PSNH and WMECO, in the form of guarantees in the normal course of business.

NU provided guarantees and various indemnifications on behalf of external parties as a result of the sales of former subsidiaries of NU Enterprises and the termination of an unregulated business, with maximum exposures either not specified or not material.

NU also issued a guaranty under which, beginning at the time the Northern Pass Transmission line goes into commercial operation, NU will guarantee the financial obligations of NPT under the TSA in an amount not to exceed $25 million. NU's obligations under the guaranty expire upon the full, final and indefeasible payment of the guaranteed obligations.

Management does not anticipate a material impact to Net Income as a result of these various guarantees and indemnifications.

The following table summarizes NU's guarantees of its subsidiaries, including CL&P, NSTAR Electric, PSNH and WMECO, as of September 30, 2014:

		Maximum Exposure
Subsidiary	Description	(in millions)		Expiration Dates
Various	Surety Bonds	$	64.3	2014 - 2016 ⁽¹⁾

Various	New England Hydro Companies' Long-Term Debt	$	2.0	Unspecified

NUSCO and RRR	Lease Payments for Vehicles and Real Estate	$	15.3	2019 and 2024

(1) Surety bond expiration dates reflect termination dates, the majority of which will be renewed or extended.

Certain surety bonds contain credit ratings triggers that would require NU parent to post collateral in the event that the unsecured debt credit ratings of NU are downgraded.

First Complaint: On September 30, 2011, a complaint was filed jointly at FERC under Sections 206 and 306 of the Federal Power Act (the "first complaint") by several New England state attorneys general, state regulatory commissions, consumer advocates and other parties (the "Complainants"). The Complainants alleged that the base ROE of 11.14 percent that has been utilized since 2006 in the calculation of formula rates for transmission service under the ISO-NE Open Access Transmission Tariff by NETOs, including CL&P, NSTAR Electric, PSNH and WMECO, was unjust and unreasonable and asserted that the rate was excessive due to changes in the capital markets. Complainants sought an order to reduce the base ROE prospectively from the date of a final FERC order (the "FERC order date"), and for the 15-month period October 1, 2011 to December 31, 2012 (the "first complaint refund period"), and to require refunds. The FERC set the case for trial before a FERC ALJ after settlement negotiations were unsuccessful in August 2012.

On August 6, 2013, the FERC ALJ issued an initial decision on the first complaint finding that the base ROE in effect during the first complaint refund period was not reasonable and recommended separate base ROEs for the first complaint refund period of 10.6 percent and for the period beginning when FERC issues its final decision (the "prospective period") of 9.7 percent, leaving policy considerations and additional adjustments to the FERC. In the third quarter of 2013, the Company recorded a series of reserves at its electric subsidiaries to recognize the potential financial impact from the FERC ALJ's initial decision for the first complaint refund period. See Cumulative Reserves below for further information on the reserves recorded in the third quarter of 2013.

On June 19, 2014, FERC issued an order on the first complaint, partially affirming and partially reversing the FERC ALJ's initial decision. FERC set a single tentative base ROE of 10.57 percent for the first complaint refund period and prospective period. FERC also modified its traditional methodology by adopting a two-step discounted cash flow analysis that it utilizes to determine the ROEs of both natural gas and oil pipeline projects. Using this methodology, FERC determined a new zone of reasonableness of 7.03 percent to 11.74 percent, and set the tentative base ROE halfway between the midpoint and the top of the zone of reasonableness. FERC also stated that a utility's “total ROE, inclusive of transmission incentive ROE adders” should not exceed the top of the new zone of reasonableness produced by this methodology. FERC instituted a paper hearing on the long-term growth rate portion of the methodology (the "paper hearing"). Rehearing requests on this new methodology were filed in July, and briefs were filed in August and September by the parties on the appropriate long-term growth rate. In the second quarter of 2014, the Company recorded additional reserves at its electric subsidiaries to recognize the potential financial impact from the FERC's June 19th order. See Cumulative Reserves below for further information on the reserves recorded in the second quarter of 2014.

On October 16, 2014, the FERC issued an order in the paper hearing, which confirmed that the base ROE should be set at 10.57 percent and that a utility's total or maximum ROE should not exceed the top of the new zone of reasonableness (11.74 percent). The FERC ordered the NETOs to provide refunds to customers for the first complaint refund period, and set the new base ROE prospectively from the order date.

Second Complaint: On December 27, 2012, a second complaint was filed jointly at FERC by several additional consumer groups and municipal parties (the "second complaint"), which challenged the NETOs' base ROE prospectively from the FERC order date and sought refunds for the 15-month period January 1, 2013 to March 31, 2014 (the "second complaint refund period").

On June 19, 2014, FERC issued an order finding that the second complaint raised issues of material fact. On July 21, 2014, the NETOs filed a rehearing request in this proceeding. On October 24, 2014, the FERC assigned the case for trial before a FERC ALJ after settlement negotiations were unsuccessful. The FERC ALJ has set a trial date beginning June 8, 2015, and will issue an initial decision on or before October 26, 2015. In the second quarter of 2014, the Company recorded reserves at its electric subsidiaries to recognize the potential financial impact from the FERC's June 19th order for the second complaint refund period. See Cumulative Reserves below for further information on the reserves recorded in the second quarter of 2014.

Third Complaint: On July 31, 2014, a third complaint was filed at FERC (the "third complaint") by most of the Complainants to the first and second complaints, claiming that the base ROE and incentive adders exceed the range of permissible ROEs, requesting FERC to reduce the NETO's base ROE prospectively from the FERC order date, and seeking refunds for the 15-month period beginning August 1, 2014 (the "third complaint refund period"). FERC has taken no action on this complaint to date. At this time, the Company cannot determine the outcome of this complaint.

Cumulative Reserves: The following is a summary as of September 30, 2014 of the cumulative reserves (excluding interest) that the Company established in the third quarter of 2013 and the second quarter of 2014 to recognize the potential financial impacts of the first and second complaints. Management is currently evaluating the impact of the October 16th order on the previously established reserves.

	NU
		Third Quarter		Second Quarter
(Millions of Dollars)		2013		2014	Total
1^st Complaint - Base ROE	$	23.7	$	1.2	$	24.9
2^nd Complaint - Base ROE		-		27.4		27.4
Incentive ROE (1^st and 2^nd Complaint)		-		23.8		23.8
Cumulative Reserve	$	23.7	$	52.4	$	76.1

	CL&P						NSTAR Electric
		Third Quarter		Second Quarter				Third Quarter		Second Quarter
(Millions of Dollars)		2013		2014	Total			2013		2014	Total
1^st Complaint - Base ROE	$	12.8	$	0.5	$	13.3	$	5.7	$	0.4	$	6.1
2^nd Complaint - Base ROE		-		13.5		13.5		-		7.5		7.5
Incentive ROE (1^st and 2^nd Complaint)		-		16.1		16.1		-		2.0		2.0
Cumulative Reserve	$	12.8	$	30.1	$	42.9	$	5.7	$	9.9	$	15.6

	PSNH						WMECO
		Third Quarter		Second Quarter				Third Quarter		Second Quarter
(Millions of Dollars)		2013		2014	Total			2013		2014	Total
1^st Complaint - Base ROE	$	2.3	$	0.1	$	2.4	$	2.9	$	0.2	$	3.1
2^nd Complaint - Base ROE		-		2.7		2.7		-		3.7		3.7
Incentive ROE (1^st and 2^nd Complaint)		-		0.8		0.8		-		4.9		4.9
Cumulative Reserve	$	2.3	$	3.6	$	5.9	$	2.9	$	8.8	$	11.7

The aggregate after-tax charge to second quarter 2014 earnings resulting from the June 19, 2014 FERC orders totaled $32.1 million at NU, $18.5 million at CL&P, $6.1 million at NSTAR Electric, $2 million at PSNH and $5.5 million at WMECO. In the third quarter of 2013, the aggregate after-tax charge to earnings totaled $14.3 million at NU, $7.7 million at CL&P, $3.4 million at NSTAR Electric, $1.4 million at PSNH and $1.8 million at WMECO.

Since 2006, NSTAR Electric has been recovering incremental costs related to the DPU-approved Safety and Reliability Programs. From 2006 through 2011, cumulative costs associated with the CPSL program resulted in an incremental revenue requirement to customers of approximately $83 million. These amounts included incremental operations and maintenance costs and the related revenue requirement for specific capital investments relative to the CPSL programs.

On May 28, 2010, the DPU issued an order on NSTAR Electric's 2006 CPSL cost recovery filing (the May 2010 Order). In October 2010, NSTAR Electric filed a reconciliation of the cumulative CPSL program activity for the periods 2006 through 2009 with the DPU in order to determine a proposed rate adjustment. The DPU allowed the proposed rates to go into effect January 1, 2011, subject to final reconciliation of CPSL program costs through a future DPU proceeding. In February 2013, NSTAR Electric updated the October 2010 filing with final activity through 2011. NSTAR Electric recorded its 2006 through 2011 revenues under the CPSL programs based on the May 2010 Order.

NSTAR Electric cannot predict the timing of a final DPU order related to its CPSL filings for the period 2006 through 2011. While management does not believe that any subsequent DPU order would result in revenues that are materially different than the amounts already recognized, it is reasonably possible that an order could have a material impact on NSTAR Electric's results of operations, financial position and cash flows.

In accordance with a generic DPU order, electric utilities in Massachusetts recover the energy-related portion of bad debt costs in their Basic Service rates. In 2007, NSTAR Electric filed its 2006 Basic Service reconciliation with the DPU proposing an adjustment related to the increase of its Basic Service bad debt charge-offs. The DPU issued an order approving the implementation of a revised Basic Service rate but instructed NSTAR Electric to reduce distribution rates by an amount equal to the increase in its Basic Service bad debt charge-offs. This adjustment to NSTAR Electric's distribution rates would eliminate the fully reconciling nature of the Basic Service bad debt adder.

In 2010, NSTAR Electric filed an appeal of the DPU's order with the SJC. In 2012, the SJC vacated the DPU order and remanded the matter to the DPU for further review. The DPU has not taken any action on the remand.

NSTAR Electric deferred approximately $34 million of costs associated with energy-related bad debt as a regulatory asset through 2011 as NSTAR Electric had concluded that it was probable that these costs would ultimately be recovered from customers. Due to the delays and the duration of the proceedings, NSTAR Electric concluded that while an ultimate outcome on the matter in its favor remained "more likely than not," it could no longer be deemed "probable." As a result, NSTAR Electric recognized a reserve related to the regulatory asset in 2012. NSTAR Electric will continue to maintain the reserve until the proceeding has been concluded with the DPU.