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 its 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:



Eversource	As of September 30, 2017		As of December 31, 2016
(Millions of Dollars)	As of September 30, 2017		As of December 31, 2016
Benefit Costs	$	1,793.8	$	1,817.8
Derivative Liabilities	385.1		423.3
Income Taxes, Net	652.7		644.5
Storm Restoration Costs	330.1		385.3
Goodwill-related	449.0		464.4
Regulatory Tracker Mechanisms	470.7		576.6
Asset Retirement Obligations	104.8		99.3
Other Regulatory Assets	65.8		115.1
Total Regulatory Assets	4,252.0		4,526.3
Less: Current Portion	746.1		887.6
Total Long-Term Regulatory Assets	$	3,505.9	$	3,638.7



	As of September 30, 2017								As of December 31, 2016
(Millions of Dollars)	CL&P		NSTAR Electric		PSNH		WMECO		CL&P		NSTAR Electric		PSNH		WMECO
Benefit Costs	$	415.8	$	436.7	$	183.2	$	84.8	$	429.3	$	438.6	$	184.2	$	86.7
Derivative Liabilities	381.6		2.4		—		—		420.5		2.8		—		—
Income Taxes, Net	441.1		92.4		22.3		30.5		437.0		89.7		24.2		30.8
Storm Restoration Costs	195.7		112.4		9.2		12.8		239.8		112.5		17.1		15.9
Goodwill-related	—		385.5		—		—		—		398.7		—		—
Regulatory Tracker Mechanisms	87.9		201.1		108.0		44.4		123.9		257.3		104.5		46.7
Asset Retirement Obligations	35.1		33.9		16.8		4.5		33.2		31.9		16.2		4.2
Other Regulatory Assets	30.0		15.5		17.6		5.4		43.4		15.6		16.5		7.1
Total Regulatory Assets	1,587.2		1,279.9		357.1		182.4		1,727.1		1,347.1		362.7		191.4
Less: Current Portion	275.0		230.6		112.5		60.6		335.5		289.4		117.2		64.1
Total Long-Term Regulatory Assets	$	1,312.2	$	1,049.3	$	244.6	$	121.8	$	1,391.6	$	1,057.7	$	245.5	$	127.3

Regulatory Costs in Other Long-Term Assets: Eversource's Regulated companies had $108.7 million (including $3.9 million for CL&P, $42.3 million for NSTAR Electric, $18.5 million for PSNH, and $25.7 million for WMECO) and $86.3 million (including $5.9 million for CL&P, $35.0 million for NSTAR Electric, $8.2 million for PSNH, and $20.1 million for WMECO) of additional regulatory costs as of September 30, 2017 and December 31, 2016, 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:



Eversource	As of September 30, 2017		As of December 31, 2016
(Millions of Dollars)	As of September 30, 2017		As of December 31, 2016
Cost of Removal	$	470.3	$	459.7
Benefit Costs	125.5		136.2
Regulatory Tracker Mechanisms	175.8		145.3
AFUDC - Transmission	65.4		65.8
Other Regulatory Liabilities	33.4		42.1
Total Regulatory Liabilities	870.4		849.1
Less: Current Portion	170.2		146.8
Total Long-Term Regulatory Liabilities	$	700.2	$	702.3



	As of September 30, 2017								As of December 31, 2016
(Millions of Dollars)	CL&P		NSTAR Electric		PSNH		WMECO		CL&P		NSTAR Electric		PSNH		WMECO
Cost of Removal	$	40.5	$	278.8	$	40.5	$	11.7	$	38.8	$	271.6	$	44.1	$	8.6
Benefit Costs	—		106.0		—		—		—		113.1		—		—
Regulatory Tracker Mechanisms	57.1		65.5		5.6		12.7		37.2		63.7		10.7		14.7
AFUDC - Transmission	49.2		7.7		—		8.5		50.2		6.9		—		8.7
Other Regulatory Liabilities	21.3		0.4		2.6		—		21.0		0.2		2.7		0.1
Total Regulatory Liabilities	168.1		458.4		48.7		32.9		147.2		455.5		57.5		32.1
Less: Current Portion	69.3		65.5		7.9		10.2		47.1		63.7		12.7		14.9
Total Long-Term Regulatory Liabilities	$	98.8	$	392.9	$	40.8	$	22.7	$	100.1	$	391.8	$	44.8	$	17.2