REGULATORY ACCOUNTING

Eversource’s Regulated companies are subject to rate-regulation that is based on cost recovery and meets the criteria for application of accounting guidance for rate-regulated operations, which considers the effect of regulation on the timing of the recognition of certain revenues and expenses. The Regulated companies’ financial statements reflect the effects of the rate-making process. The rates charged to the customers of Eversource’s Regulated companies are designed to collect each company’s costs to provide service, including a return on investment.

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 if 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.

Regulatory Assets: The components of regulatory assets were as follows:



	As of September 30, 2016		As of December 31, 2015
(Millions of Dollars)	Eversource		Eversource
Benefit Costs	$	1,618.7	$	1,828.2
Derivative Liabilities	443.7		388.0
Income Taxes, Net	641.7		650.9
Storm Restoration Costs	407.7		436.9
Goodwill-related	469.5		484.9
Regulatory Tracker Mechanisms	454.1		526.5
Contractual Obligations - Yankee Companies	66.0		134.4
Other Regulatory Assets	120.9		134.0
Total Regulatory Assets	4,222.3		4,583.8
Less: Current Portion	752.4		845.8
Total Long-Term Regulatory Assets	$	3,469.9	$	3,738.0



	As of September 30, 2016								As of December 31, 2015
(Millions of Dollars)	CL&P		NSTAR Electric		PSNH		WMECO		CL&P		NSTAR Electric		PSNH		WMECO
Benefit Costs	$	407.1	$	414.6	$	174.7	$	82.1	$	413.6	$	479.9	$	164.2	$	84.9
Derivative Liabilities	441.0		2.7		—		—		380.8		1.3		—		—
Income Taxes, Net	438.5		88.3		27.0		31.2		444.4		85.7		34.5		31.8
Storm Restoration Costs	253.7		115.1		20.8		18.1		271.4		110.9		31.5		23.1
Goodwill-related	—		403.1		—		—		—		416.3		—		—
Regulatory Tracker Mechanisms	50.6		230.4		99.9		37.8		45.1		311.0		101.2		40.1
Other Regulatory Assets	75.4		48.2		30.8		13.2		82.0		56.3		31.5		11.3
Total Regulatory Assets	1,666.3		1,302.4		353.2		182.4		1,637.3		1,461.4		362.9		191.2
Less: Current Portion	267.7		259.2		100.6		54.1		268.3		348.4		105.0		56.2
Total Long-Term Regulatory Assets	$	1,398.6	$	1,043.2	$	252.6	$	128.3	$	1,369.0	$	1,113.0	$	257.9	$	135.0

Regulatory Costs in Other Long-Term Assets: The Regulated companies had $87.9 million (including $4.0 million for CL&P, $40.2 million for NSTAR Electric, $6.1 million for PSNH and $20.1 million for WMECO) and $75.3 million (including $3.1 million for CL&P, $35.4 million for NSTAR Electric, $4.8 million for PSNH, and $16.7 million for WMECO) of additional regulatory costs as of September 30, 2016 and December 31, 2015, 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.

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



	As of September 30, 2016		As of December 31, 2015
(Millions of Dollars)	Eversource		Eversource
Cost of Removal	$	457.7	$	437.1
Regulatory Tracker Mechanisms	153.4		99.7
AFUDC - Transmission	65.8		66.1
Other Regulatory Liabilities	33.7		18.5
Total Regulatory Liabilities	710.6		621.4
Less: Current Portion	160.4		107.8
Total Long-Term Regulatory Liabilities	$	550.2	$	513.6



	As of September 30, 2016								As of December 31, 2015
(Millions of Dollars)	CL&P		NSTAR Electric		PSNH		WMECO		CL&P		NSTAR Electric		PSNH		WMECO
Cost of Removal	$	39.7	$	269.5	$	45.8	$	5.8	$	24.1	$	257.4	$	47.2	$	2.8
Benefit Costs	—		81.7		—		—		—		—		—		—
Regulatory Tracker Mechanisms	62.2		48.4		2.6		12.2		56.2		3.3		3.4		12.9
AFUDC - Transmission	50.6		6.4		—		8.8		51.5		5.7		—		8.9
Other Regulatory Liabilities	12.8		—		3.5		—		4.2		1.3		4.2		0.1
Total Regulatory Liabilities	165.3		406.0		51.9		26.8		136.0		267.7		54.8		24.7
Less: Current Portion	75.7		48.8		5.5		12.4		61.2		3.3		6.9		13.1
Total Long-Term Regulatory Liabilities	$	89.6	$	357.2	$	46.4	$	14.4	$	74.8	$	264.4	$	47.9	$	11.6