REGULATORY ACCOUNTING

6 Months Ended

Jun. 30, 2020

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, plus a return on investment.

The application of accounting guidance for rate-regulated enterprises results in recording regulatory assets and liabilities. Regulatory assets represent the deferral of incurred costs that are probable of future recovery in customer rates. Regulatory assets are amortized as the incurred costs are recovered through customer rates. Regulatory liabilities represent either revenues received from customers to fund expected costs that have not yet been incurred or probable future refunds to customers.

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 June 30, 2020								As of December 31, 2019
(Millions of Dollars)	Eversource		CL&P		NSTAR Electric		PSNH		Eversource		CL&P		NSTAR Electric		PSNH
Benefit Costs	$	2,306.7	$	493.5	$	615.6	$	209.9	$	2,382.9	$	539.0	$	629.8	$	218.2
Income Taxes, Net	731.8		462.4		109.1		12.6		725.8		458.8		108.0		12.8
Securitized Stranded Costs	543.7		—		—		543.7		565.3		—		—		565.3
Storm Restoration Costs, Net	486.6		251.9		176.9		57.8		540.6		274.6		200.6		65.4
Regulatory Tracker Mechanisms	590.7		251.0		222.4		106.7		411.5		78.3		207.1		65.8
Derivative Liabilities	321.9		322.0		—		—		334.5		329.2		—		—
Goodwill-related	323.1		—		277.4		—		331.5		—		284.6		—
Asset Retirement Obligations	102.5		31.7		53.8		3.7		97.2		30.8		50.3		3.6
Other Regulatory Assets	127.6		24.5		59.2		14.8		125.4		25.2		55.2		14.7
Total Regulatory Assets	5,534.6		1,837.0		1,514.4		949.2		5,514.7		1,735.9		1,535.6		945.8
Less: Current Portion	805.1		349.2		296.4		110.3		651.1		178.6		285.6		84.1
Total Long-Term Regulatory Assets	$	4,729.5	$	1,487.8	$	1,218.0	$	838.9	$	4,863.6	$	1,557.3	$	1,250.0	$	861.7

Regulatory Costs in Long-Term Assets: Eversource's regulated companies had $176.3 million (including $85.2 million for CL&P, $49.0 million for NSTAR Electric and $15.0 million for PSNH) and $146.0 million (including $51.8 million for CL&P, $55.7 million for NSTAR Electric and $18.0 million for PSNH) of additional regulatory costs as of June 30, 2020 and December 31, 2019, 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. As of June 30, 2020, COVID-19 related costs deferred by Eversource totaled $6.6 million, of which $4.1 million was related to uncollectible expense incurred at our natural gas distribution segment.

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



	As of June 30, 2020								As of December 31, 2019
(Millions of Dollars)	Eversource		CL&P		NSTAR Electric		PSNH		Eversource		CL&P		NSTAR Electric		PSNH
EDIT due to Tax Cuts and Jobs Act	$	2,817.7	$	1,016.7	$	1,056.5	$	390.1	$	2,844.6	$	1,022.8	$	1,071.2	$	392.8
Cost of Removal	590.5		84.6		345.7		12.1		559.8		64.6		330.6		16.3
Benefit Costs	83.9		—		72.4		—		84.5		—		72.2		—
Regulatory Tracker Mechanisms	417.7		156.4		154.9		78.6		325.1		94.8		165.6		57.0
AFUDC - Transmission	75.5		45.3		30.2		—		73.2		46.0		27.2		—
Other Regulatory Liabilities	136.6		35.8		52.8		8.6		132.0		19.6		59.0		13.1
Total Regulatory Liabilities	4,121.9		1,338.8		1,712.5		489.4		4,019.2		1,247.8		1,725.8		479.2
Less: Current Portion	442.0		155.2		185.3		83.6		361.2		82.8		209.2		65.8
Total Long-Term Regulatory Liabilities	$	3,679.9	$	1,183.6	$	1,527.2	$	405.8	$	3,658.0	$	1,165.0	$	1,516.6	$	413.4