PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

Eversource Service sponsors a defined benefit retirement plan (Pension Plan) that covers eligible employees, including, among others, employees of CL&P, NSTAR Electric, PSNH and WMECO. In addition to the Pension Plan, Eversource maintains non-qualified defined benefit retirement plans sponsored by Eversource Service (SERP Plans), which provide benefits in excess of Internal Revenue Code limitations to eligible participants consisting of current and retired employees. Eversource Service also sponsors defined benefit postretirement plans that provide certain benefits, primarily medical, dental and life insurance, to retired employees that met certain age and service eligibility requirements, including, among others, employees of CL&P, NSTAR Electric, PSNH and WMECO (PBOP Plan).

Effective January 1, 2016, the Company refined its method of estimating the discount rate for the service and interest cost components of Pension and PBOP expense from the yield-curve approach to the spot rate methodology, which provides a more precise measurement by matching projected cash flows to the corresponding spot rates on the yield curve. Historically, these components were estimated using the same weighted-average discount rate as for the funded status. The discount rates used to estimate the 2016 service cost were 4.89 percent and 4.09 percent for the Pension and PBOP plans, respectively. The discount rates used to estimate the 2016 interest cost were 3.80 percent and 2.88 percent for the Pension and PBOP plans, respectively. The total pre-tax benefit of this change on Pension and PBOP expense, prior to the capitalized portion and amounts deferred and recovered through rate reconciliation mechanisms, for the three months ended September 30, 2016 was $11.5 million and $2.5 million for the Pension and PBOP plans, respectively, and $35 million and $7.5 million for the nine months ended September 30, 2016, respectively.

In August 2016, the Company amended its PBOP Plan, which standardized separate benefit structures that existed within the plan and made other benefit changes. The amendment required a remeasurement of the benefit obligation using current assumptions, including updated discount rates and asset values. The discount rate used to remeasure the benefit obligation was 3.62 percent. The remeasurement resulted in a reduction to the benefit liability of approximately $244 million, offset by an increase to the unamortized actuarial losses of approximately $142 million driven primarily by the decrease in the discount rate. Overall, the impact of the remeasurement reduced the PBOP plan’s accumulated projected benefit obligation and regulatory assets by approximately $102 million and $106 million, respectively, and increased accumulated other comprehensive losses by $4.0 million. The remeasurement resulted in a decrease in the net periodic benefit costs for PBOP benefits, prior to the capitalized portion and amounts deferred and recovered through rate reconciliation mechanisms, of approximately $10 million, which will be recorded in the period August 1, 2016 through December 31, 2016, and most of this amount will be deferred for future refund to customers.

The components of net periodic benefit expense for the Pension, SERP and PBOP Plans are shown below. The net periodic benefit expense and the intercompany allocations, less the capitalized portions of pension, SERP and PBOP amounts, are included in Operations and Maintenance expense on the statements of income. Capitalized pension and PBOP amounts relate to employees working on capital projects and are included in Property, Plant and Equipment, Net on the balance sheets. Pension, SERP and PBOP expense reflected in the statements of cash flows for CL&P, NSTAR Electric, PSNH and WMECO does not include the intercompany allocations or the corresponding capitalized portion, as these amounts are cash settled on a short-term basis.



	Pension and SERP
Eversource	For the Three Months Ended						For the Nine Months Ended
(Millions of Dollars)	September 30, 2016			September 30, 2015 ⁽¹⁾			September 30, 2016			September 30, 2015 ⁽¹⁾
Service Cost	$	18.6		$	22.7		$	56.6		$	68.7
Interest Cost	46.4			56.9			139.2			170.3
Expected Return on Plan Assets	(79.4		)	(83.9		)	(238.5		)	(252.1		)
Actuarial Loss	31.4			36.5			94.2			111.9
Prior Service Cost	0.9			0.9			2.6			2.7
Total Net Periodic Benefit Expense	$	17.9		$	33.1		$	54.1		$	101.5
Capitalized Pension Expense	$	5.4		$	9.8		$	16.8		$	31.3

	PBOP
Eversource	For the Three Months Ended						For the Nine Months Ended
(Millions of Dollars)	September 30, 2016			September 30, 2015 ⁽¹⁾			September 30, 2016			September 30, 2015 ⁽¹⁾
Service Cost	$	3.0		$	4.1		$	9.2		$	10.3
Interest Cost	7.5			11.8			26.5			30.4
Expected Return on Plan Assets	(15.9		)	(16.9		)	(47.3		)	(43.2		)
Actuarial Loss	3.0			1.7			5.0			4.5
Prior Service Credit	(3.6		)	(0.1		)	(3.7		)	(0.3		)
Total Net Periodic Benefit Expense/(Income)	$	(6.0	)	$	0.6		$	(10.3	)	$	1.7
Capitalized PBOP Expense/(Income)	$	(2.6	)	$	—		$	(4.6	)	$	0.1



	Pension and SERP
	For the Three Months Ended September 30, 2016												For the Three Months Ended September 30, 2015
(Millions of Dollars)	CL&P			NSTAR Electric			PSNH			WMECO			CL&P			NSTAR Electric			PSNH ⁽¹⁾			WMECO
Service Cost	$	4.6		$	3.3		$	2.5		$	0.8		$	6.2		$	3.7		$	3.1		$	1.0
Interest Cost	10.2			8.5			5.1			2.1			12.9			10.0			6.1			2.6
Expected Return on Plan Assets	(18.0		)	(16.9		)	(9.6		)	(4.4		)	(19.8		)	(17.5		)	(10.1		)	(4.7		)
Actuarial Loss	6.3			8.7			2.5			1.3			8.0			8.7			2.9			1.6
Prior Service Cost	0.4			—			0.1			0.1			0.4			—			0.1			0.1
Total Net Periodic Benefit Expense/(Income)	$	3.5		$	3.6		$	0.6		$	(0.1	)	$	7.7		$	4.9		$	2.1		$	0.6
Intercompany Allocations	$	3.5		$	2.2		$	1.0		$	0.6		$	5.8		$	3.4		$	1.6		$	1.1
Capitalized Pension Expense	$	2.2		$	2.0		$	0.4		$	0.1		$	4.7		$	2.7		$	0.8		$	0.5

	Pension and SERP
	For the Nine Months Ended September 30, 2016												For the Nine Months Ended September 30, 2015
(Millions of Dollars)	CL&P			NSTAR Electric			PSNH			WMECO			CL&P			NSTAR Electric			PSNH ⁽¹⁾			WMECO
Service Cost	$	14.3		$	9.9		$	7.5		$	2.4		$	18.4		$	11.2		$	9.0		$	3.2
Interest Cost	31.2			25.3			15.4			6.3			38.4			30.2			18.1			7.8
Expected Return on Plan Assets	(54.2		)	(50.7		)	(28.9		)	(13.1		)	(59.1		)	(52.5		)	(30.3		)	(14.2		)
Actuarial Loss	19.2			25.8			7.5			4.1			24.2			27.0			8.8			4.8
Prior Service Cost	1.1			—			0.3			0.2			1.1			0.1			0.4			0.2
Total Net Periodic Benefit Expense/(Income)	$	11.6		$	10.3		$	1.8		$	(0.1	)	$	23.0		$	16.0		$	6.0		$	1.8
Intercompany Allocations	$	10.3		$	6.7		$	3.0		$	1.9		$	18.0		$	10.3		$	5.0		$	3.3
Capitalized Pension Expense	$	7.1		$	5.7		$	1.0		$	0.3		$	14.1		$	8.6		$	2.6		$	1.4



	PBOP
	For the Three Months Ended September 30, 2016												For the Three Months Ended September 30, 2015
(Millions of Dollars)	CL&P			NSTAR Electric			PSNH			WMECO			CL&P			NSTAR Electric			PSNH ⁽¹⁾			WMECO
Service Cost	$	0.6		$	0.6		$	0.4		$	0.1		$	0.5		$	1.3		$	0.3		$	0.1
Interest Cost	1.3			2.5			0.7			0.3			1.8			4.8			1.0			0.3
Expected Return on Plan Assets	(2.5		)	(6.4		)	(1.4		)	(0.6		)	(2.8		)	(6.8		)	(1.5		)	(0.6		)
Actuarial Loss	0.5			1.2			0.2			—			0.2			0.6			0.1			—
Prior Service Cost/(Credit)	0.2			(2.9		)	0.1			—			—			(0.1		)	—			—
Total Net Periodic Benefit Expense/(Income)	$	0.1		$	(5.0	)	$	—		$	(0.2	)	$	(0.3	)	$	(0.2	)	$	(0.1	)	$	(0.2	)
Intercompany Allocations	$	—		$	(0.1	)	$	—		$	—		$	0.4		$	0.2		$	0.1		$	0.1
Capitalized PBOP Expense/(Income)	$	—		$	(2.2	)	$	—		$	(0.1	)	$	(0.1	)	$	—		$	0.1		$	—

	PBOP
	For the Nine Months Ended September 30, 2016												For the Nine Months Ended September 30, 2015
(Millions of Dollars)	CL&P			NSTAR Electric			PSNH			WMECO			CL&P			NSTAR Electric			PSNH ⁽¹⁾			WMECO
Service Cost	$	1.4		$	2.5		$	0.9		$	0.3		$	1.6		$	4.0		$	1.0		$	0.3
Interest Cost	4.0			10.3			2.2			0.8			5.4			14.2			2.9			1.1
Expected Return on Plan Assets	(7.6		)	(19.2		)	(4.2		)	(1.7		)	(8.3		)	(20.5		)	(4.4		)	(1.9		)
Actuarial Loss	0.9			1.7			0.5			—			0.5			1.8			0.4			—
Prior Service Cost/(Credit)	0.2			(2.9		)	0.1			—			—			(0.1		)	—			—
Total Net Periodic Benefit Income	$	(1.1	)	$	(7.6	)	$	(0.5	)	$	(0.6	)	$	(0.8	)	$	(0.6	)	$	(0.1	)	$	(0.5	)
Intercompany Allocations	$	0.3		$	—		$	—		$	—		$	1.4		$	0.7		$	0.3		$	0.3
Capitalized PBOP Expense/(Income)	$	(0.5	)	$	(3.3	)	$	—		$	(0.3	)	$	(0.2	)	$	(0.1	)	$	0.2		$	(0.1	)


⁽¹⁾	Amounts excluded approximately $0.8 million and $2.4 million for the three and nine months ended September 30, 2015, respectively, that represented amounts included in other deferred debits.