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 follow 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)	2014		2013
Benefit Costs	$	2,016.0	$	1,240.2
Derivative Liabilities		425.5		638.0
Income Taxes, Net		635.3		626.2
Storm Restoration Costs		502.8		589.6
Goodwill-related		505.4		525.9
Regulatory Tracker Mechanisms		350.5		323.4
Contractual Obligations - Yankee Companies		123.8		154.2
Buy Out Agreements for Power Contracts		42.6		70.2
Other Regulatory Assets		124.7		126.8
Total Regulatory Assets		4,726.6		4,294.5
Less: Current Portion		672.5		535.8
Total Long-Term Regulatory Assets	$	4,054.1	$	3,758.7

	As of December 31,
	2014								2013
			NSTAR								NSTAR
(Millions of Dollars)	CL&P		Electric		PSNH		WMECO		CL&P		Electric		PSNH		WMECO
Benefit Costs	$	445.4	$	515.9	$	174.3	$	85.0	$	297.7	$	496.7	$	100.6	$	57.3
Derivative Liabilities		410.9		4.5		-		-		630.4		7.7		-		-
Income Taxes, Net		437.7		83.7		38.0		35.5		415.5		84.0		40.3		43.7
Storm Restoration Costs		319.6		103.7		47.7		31.8		397.8		109.3		43.7		38.8
Goodwill-related		-		433.9		-		-		-		451.5		-		-
Regulatory Tracker Mechanisms		16.1		141.4		103.5		33.0		8.0		169.5		83.3		32.6
Buy Out Agreements for Power Contracts		-		38.6		4.0		-		-		64.7		5.5		-
Other Regulatory Assets		66.1		56.1		37.3		12.9		64.6		55.9		38.1		16.7
Total Regulatory Assets		1,695.8		1,377.8		404.8		198.2		1,814.0		1,439.3		311.5		189.1
Less: Current Portion		220.3		198.7		111.7		51.9		150.9		204.1		92.2		43.0
Total Long-Term Regulatory Assets	$	1,475.5	$	1,179.1	$	293.1	$	146.3	$	1,663.1	$	1,235.2	$	219.3	$	146.1

Regulatory Costs in Other Long-Term Assets: The Regulated companies had $60.5 million ($1.3 million for CL&P, $33.2 million for NSTAR Electric, $0.9 million for PSNH, and $11 million for WMECO) and $65.1 million ($7.3 million for CL&P, $33.4 million for NSTAR Electric, and $10.1 million for WMECO) of additional regulatory costs as of December 31, 2014 and 2013, 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 NSTAR Electric balance as of December 31, 2014 and 2013 primarily related to costs deferred in connection with the basic service bad debt adder. See Note 11G, "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 costs 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 $1.7 million and $1.9 million for CL&P and $43.3 million and $33.1 million for PSNH as of December 31, 2014 and 2013, 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 PBOP plans. The liability recorded by the Regulated companies to recognize the funded status of their retiree benefit plans are offset by regulatory assets in lieu of a charge to Accumulated Other Comprehensive Income/(Loss), reflecting ultimate recovery from customers through rates. All amounts are 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. As these regulatory assets do not represent a cash outlay for the Regulated companies, no carrying charge is recovered from customers.

The increase in the funded status liability of the retiree benefit plans and the corresponding regulatory assets was primarily driven by a change in mortality assumptions, which increased the estimate of benefits to be provided to plan participants, and a decrease in the discount rate assumption. For further information on the funded status liability and related regulatory assets of the Pension, SERP and PBOP plans, see Note 9A, "Employee Benefits – Pension Benefits and Postretirement Benefits Other Than Pensions."

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 PBOP expenses related to distribution operations through rate reconciling mechanisms that fully track the change in net pension and PBOP expenses each year.

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 4, "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.

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 10, "Income Taxes," to the financial statements.

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. Once a storm is declared major, all qualifying expenses incurred during storm restoration efforts are deferred and recovered from customers. In addition to storm restoration costs, CL&P and PSNH are each allowed to recover storm pre-staging costs in accordance with applicable regulation.

CL&P, NSTAR Electric, PSNH and WMECO experienced several significant storm events, including Tropical Storm Irene in 2011, the October 2011 snowstorm, Storm Sandy in 2012 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. Each company incurred significant costs to repair damage and restore customers' service. In addition, on November 26, 2014, a snowstorm caused damage to the electric delivery systems of PSNH and WMECO. This snowstorm resulted in estimated deferred storm restoration costs of approximately $23 million at PSNH and approximately $3 million at WMECO. The storm restoration cost regulatory asset balance at CL&P, NSTAR Electric, PSNH and WMECO reflects deferrable 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 that recovery from customers is probable through the applicable regulatory recovery process.

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

CL&P: As of December 31, 2014, all CL&P deferred storm costs have been reviewed and approved for recovery in distribution rates.

On March 12, 2014, the PURA approved recovery of $365 million of deferred storm restoration costs (with carrying charges) associated with five major storms that occurred in 2011 and 2012 and ordered CL&P to capitalize approximately $18 million of the deferred storm restoration costs as utility plant, which will be recovered through depreciation expense in future rate proceedings. CL&P will recover the $365 million in its distribution rates over a six-year period that commenced on December 1, 2014. The remaining costs were either disallowed or are probable of recovery from other sources. These costs did not have a material impact on CL&P's financial position, results of operations or cash flows.

Effective June 1, 2014, CL&P received $65.4 million of DOE Phase II Damages proceeds. On June 17, 2014, the PURA ordered CL&P to refund these proceeds to customers by offsetting the deferred storm restoration costs regulatory asset. For further information on the DOE Phase II Damages proceeds received from the Yankee Companies, see Note 11C, "Commitments and Contingencies - Contractual Obligations - Yankee Companies," to the financial statements.

On December 17, 2014, as part of the distribution rate case decision, CL&P was also allowed recovery of the 2013 storm costs and residual 2012 Storm Sandy costs over a seven-year period that commenced on December 1, 2014.

NSTAR Electric: On December 30, 2013, the DPU approved recovery of $34.2 million of NSTAR Electric's storm restoration costs, plus carrying costs, related to Tropical Storm Irene in 2011 and the October 2011 snowstorm. NSTAR Electric is recovering these costs, plus carrying costs, in its distribution rates over a five-year period that commenced on January 1, 2014.

PSNH: 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 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 April 7, 2014, PSNH received an audit report from the NHPUC approving storm costs from 2011 through March 2013.

WMECO: On December 20, 2013, the DPU approved WMECO's 2013 Annual Storm Reserve Recovery Cost Adjustment filing to begin recovering the October 2011 snowstorm and 2012 Storm Sandy restoration costs, which commenced on January 1, 2014, subject to further review and reconciliation. On December 5, 2014, the DPU approved the majority of deferred storm costs through 2011.

Goodwill-related: 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, 2014, there were 25 years of amortization remaining).

Regulatory Tracker Mechanisms: The Regulated companies' approved rates are designed to recover their incurred costs to provide service to customers. The Regulated companies 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 and CL&P's (effective December 1, 2014) distribution revenue is decoupled from their customer sales volume. CL&P and WMECO reconcile their 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 during a 12-month period is adjusted through rates in the following period.

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 nuclear fuel storage. 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 totaled $97.8 million and $129.8 million as of December 31, 2014 and 2013, respectively. Intercompany transactions between CL&P, NSTAR Electric, PSNH and WMECO and the CYAPC and YAEC companies have been eliminated in consolidation of the NU financial statements.

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. 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.

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.

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

NU	As of December 31,
(Millions of Dollars)	2014		2013
Cost of Removal	$	439.9	$	435.1
Regulatory Tracker Mechanisms		192.3		151.2
AFUDC - Transmission		67.1		68.1
Other Regulatory Liabilities		50.8		52.9
Total Regulatory Liabilities		750.1		707.3
Less: Current Portion		235.0		204.3
Total Long-Term Regulatory Liabilities	$	515.1	$	503.0

	As of December 31,
	2014								2013
			NSTAR								NSTAR
(Millions of Dollars)	CL&P		Electric		PSNH		WMECO		CL&P		Electric		PSNH		WMECO
Cost of Removal	$	19.7	$	258.3	$	50.3	$	1.1	$	29.1	$	250.0	$	49.7	$	-
Regulatory Tracker Mechanisms		122.6		20.7		14.2		22.3		95.6		21.9		21.6		21.1
AFUDC - Transmission		53.6		4.4		-		9.1		54.7		4.1		-		9.3
Other Regulatory Liabilities		10.1		28.9		2.9		0.8		8.4		31.1		1.0		3.4
Total Regulatory Liabilities		206.0		312.3		67.4		33.3		187.8		307.1		72.3		33.8
Less: Current Portion		124.7		49.6		16.0		22.5		94.0		54.0		20.6		19.9
Total Long-Term Regulatory Liabilities	$	81.3	$	262.7	$	51.4	$	10.8	$	93.8	$	253.1	$	51.7	$	13.9

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, 2014, 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.

2014 Regulatory Developments: As a result of actions taken by the FERC and other developments in the pending base ROE complaint proceedings described in Note 11E, "Commitments and Contingencies – FERC Base ROE Complaints," in 2014 the Company recorded reserves at its electric subsidiaries to recognize the potential financial impact of the first and second complaints. As of December 31, 2014, the cumulative pre-tax reserves (excluding interest), which exclude refunds for the first complaint refund period, totaled $60.7 million at NU, $33.5 million at CL&P, $13.6 million at NSTAR Electric, $5.1 million at PSNH and $8.5 million at WMECO. As of December 31, 2013, as a result of the 2013 FERC ALJ initial decision, the Company had an aggregate pre-tax reserve (excluding interest) of $23.7 million at NU, $12.8 million at CL&P, $5.7 million at NSTAR Electric, $2.3 million at PSNH and $2.9 million at WMECO. These reserves were recorded as a regulatory liability in Regulatory Tracker Mechanisms and as a reduction of Operating Revenues.

Effective June 1, 2014, as a result of damages awarded to the Yankee Companies for spent nuclear fuel lawsuits against the DOE described in Note 11C, "Commitments and Contingencies - Contractual Obligations - Yankee Companies," 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. 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 Regulatory Tracker Mechanisms. Refunds to customers for these DOE proceeds began in 2014.

On December 31, 2014, NSTAR Electric, NSTAR Gas and the Massachusetts Attorney General filed a comprehensive settlement agreement with the DPU. The comprehensive settlement agreement included resolution of the outstanding NSTAR Electric CPSL program filings for the periods 2006 through 2011, the NSTAR Electric and NSTAR Gas PAM and energy efficiency-related customer billing adjustments reported in 2012, and the NSTAR Electric energy efficiency program filings regarding LBR for the periods 2008 through 2011. If approved by the DPU, NSTAR Electric and NSTAR Gas will be required to refund a total of $44.7 million to their respective customers, which was included in Regulatory Tracker Mechanisms and Other Regulatory Liabilities as of December 31, 2014. For further information, see Note 11F, "Commitments and Contingencies – 2014 Comprehensive Settlement Agreement."