REGULATORY ACCOUNTING

9 Months Ended

Sep. 30, 2019

Eversource's utility 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:



	As of September 30, 2019								As of December 31, 2018
(Millions of Dollars)	Eversource		CL&P		NSTAR Electric		PSNH		Eversource		CL&P		NSTAR Electric		PSNH
Benefit Costs	$	1,835.1	$	400.5	$	542.8	$	148.5	$	1,914.8	$	424.7	$	544.4	$	169.6
Income Taxes, Net	713.4		460.2		108.6		11.4		728.6		454.4		105.9		8.3
Securitized Stranded Costs	576.1		—		—		576.1		608.4		—		—		608.4
Storm Restoration Costs, Net	508.9		258.9		190.2		59.8		576.0		302.6		212.9		60.5
Regulatory Tracker Mechanisms	282.7		56.5		121.1		58.1		316.0		33.2		169.1		67.3
Derivative Liabilities	345.8		342.3		—		—		356.5		356.5		—		—
Goodwill-related	335.7		—		288.3		—		348.4		—		299.1		—
Asset Retirement Obligations	101.3		33.8		51.7		3.5		89.2		32.3		42.2		3.3
Other Regulatory Assets	131.8		25.6		57.6		13.0		208.0		27.0		64.6		12.1
Total Regulatory Assets	4,830.8		1,577.8		1,360.3		870.4		5,145.9		1,630.7		1,438.2		929.5
Less: Current Portion	538.2		173.3		201.2		78.1		514.8		125.2		241.7		67.2
Total Long-Term Regulatory Assets	$	4,292.6	$	1,404.5	$	1,159.1	$	792.3	$	4,631.1	$	1,505.5	$	1,196.5	$	862.3

Storm Filings: On November 16, 2018, CL&P filed for recovery of $153 million of storm costs incurred from October 2017 through May 2018, with recovery over six years to begin May 1, 2019. Through the course of the proceeding, CL&P updated its request to $145.5 million to reflect final invoicing and capitalization amounts. On April 17, 2019, PURA authorized recovery of $141.0 million as part of storm cost recovery and the remainder to be recorded to plant or other balance sheet accounts. CL&P began recovery of the $141.0 million in distribution rates effective May 1, 2019.

On March 26, 2019, the NHPUC approved the recovery of $38.1 million, plus carrying charges, of storm costs incurred from December 2013 through April 2016 and the transfer of funding from PSNH’s major storm reserve to recover those costs. The costs of these storms (excluding the equity return component of the carrying charges) were deferred as regulatory assets, and the funding reserve collected from customers was accrued as a regulatory liability. As a result of the duration of time between incurring storm costs in December 2013 through April 2016 and final approval from the NHPUC in 2019, PSNH recognized $5.2 million (pre-tax) for the equity return component of the carrying charges within Other Income, Net on the statement of income in the first quarter of 2019, which has been collected from customers. Also included in the March 26, 2019 NHPUC approval is a prospective requirement for PSNH to annually net its storm funding reserve collected from customers against deferred storm costs.

In addition, on June 27, 2019, the NHPUC approved a temporary rate settlement that permits PSNH to recover approximately $68.5 million in unrecovered storm costs over a five-year period beginning August 1, 2019, with debt carrying charges.

Regulatory Costs in Long-Term Assets: Eversource's regulated companies had $144.3 million (including $44.7 million for CL&P, $61.5 million for NSTAR Electric and $17.8 million for PSNH) and $122.9 million (including $42.1 million for CL&P, $49.3 million for NSTAR Electric and $12.2 million for PSNH) of additional regulatory costs as of September 30, 2019 and December 31, 2018, respectively, that were included in 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, 2019								As of December 31, 2018
(Millions of Dollars)	Eversource		CL&P		NSTAR Electric		PSNH		Eversource		CL&P		NSTAR Electric		PSNH
EDIT due to Tax Cuts and Jobs Act	$	2,846.9	$	1,025.7	$	1,083.2	$	394.0	$	2,883.0	$	1,031.0	$	1,103.7	$	396.4
Cost of Removal	552.0		56.3		325.2		20.5		521.0		39.9		307.1		22.1
Benefit Costs	79.7		—		67.4		—		91.2		—		76.9		—
Regulatory Tracker Mechanisms	404.3		169.7		167.9		43.3		309.0		89.5		163.7		48.3
AFUDC - Transmission	72.6		46.4		26.2		—		70.7		47.4		23.3		—
Revenue Subject to Refund due to Tax Cuts and Jobs Act	18.3		—		—		9.0		24.6		—		—		12.6
Other Regulatory Liabilities	111.9		29.9		49.1		6.0		80.2		24.0		29.2		4.2
Total Regulatory Liabilities	4,085.7		1,328.0		1,719.0		472.8		3,979.7		1,231.8		1,703.9		483.6
Less: Current Portion	441.2		168.1		199.4		54.7		370.2		109.6		190.6		55.5
Total Long-Term Regulatory Liabilities	$	3,644.5	$	1,159.9	$	1,519.6	$	418.1	$	3,609.5	$	1,122.2	$	1,513.3	$	428.1