Eversource 2009 Annual Report Download - page 142

FS-57
The following tables present changes for the year ended December 31, 2009 in the Level 3 category of assets and liabilities measured
at fair value on a recurring basis. This category includes derivative assets and liabilities, which are presented on a net basis. The
Company classifies assets and liabilities in Level 3 of the fair value hierarchy when there is reliance on at least one significant
unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 assets and
liabilities typically also rely on a number of inputs that are observable either directly or indirectly. Thus, the gains and losses presented
below include changes in fair value that are attributable to both observable and unobservable inputs. There were no transfers into or
out of Level 3 assets and liabilities for the years ended December 31, 2009 and 2008:
For the Years Ended December 31,
2009 2008
(Millions of Dollars) NU NU
Derivatives, Net:
Fair value at beginning of year (1) $ (669.2) $ (511.1)
Net realized/unrealized gains/(losses) included in:
Net income (2) 6.2 12.0
Regulatory assets/liabilities (114.3) (138.0)
Purchases, issuances and settlements 16.1 (32.1)
Fair value at end of year $ (761.2) $ (669.2)
Period change in unrealized gains included in Net
income relating to items held at end of year $ 6.3 $ 7.0
For the Years Ended December 31,
2009 2008
(Millions of Dollars) CL&P PSNH CL&P PSNH
Derivatives, Net:
Fair value at beginning of year (1) $ (611.1) $ 4.1 $ (426.9) $ 15.7
Net realized/unrealized gains/(losses) included in:
Regulatory assets/liabilities (107.8) (3.6) (128.0) (11.5)
Purchases, issuances and settlements 3.1 (0.1) (56.2) (0.1)
Fair value at end of year $ (715.8) $ 0.4 $ (611.1) $ 4.1
(1) Amounts at beginning of 2008 reflect fair values after initial adoption of fair value measurement accounting guidance. As a result of
implementation, the Company recorded an increase to Derivative liabilities and a pre-tax charge to Net Income of $6.1 million as of
January 1, 2008 related to NU Enterprises' remaining derivative contracts.
(2) Realized and unrealized gains and losses on derivatives included in Net Income relate to the remaining Select Energy wholesale
marketing contracts and are reported in Fuel, purchased and net interchange power on the accompanying consolidated statements
of income.
5. Employee Benefits (All Companies)
A. Pension Benefits and Postretirement Benefits Other Than Pensions
Pursuant to GAAP, NU is required to record the funded status of its pension and PBOP plans on the accompanying consolidated
balance sheets, based on the difference between the projected benefit obligation for the Pension Plan and accumulated postretirement
benefit obligation for the PBOP Plan and the fair value of plan assets measured in accordance with fair value measurement accounting
guidance. The funded status is recorded with an offset to Accumulated other comprehensive income/(loss) on the accompanying
consolidated balance sheets, if negative. This amount is remeasured annually, or as circumstances dictate.
As of December 31, 2009 and 2008, NU recorded an after-tax charge totaling $5.4 million and $38 million, respectively, to Accumulated
other comprehensive income/(loss) for its unregulated subsidiaries. However, because the regulated companies are cost-of-service,
rate-regulated entities, regulatory assets were recorded in the amount of $1.1 billion ($502.4 million - CL&P; $154.2 million - PSNH;
$104.9 million - WMECO), and $1.1 billion ($537.7 million - CL&P; $142.9 million - PSNH; $113.5 million - WMECO), respectively, as
these benefits expense amounts have been and continue to be recoverable in cost-of-service, regulated rates. Regulatory accounting
was also applied to the portions of the NUSCO costs that support the regulated companies, as these amounts are also recoverable.
Pension Benefits: NUSCO sponsors a single uniform noncontributory defined benefit retirement plan (Pension Plan), which is subject to
the provisions of the Employee Retirement Income Security Act (ERISA). The Pension Plan covers nonbargaining unit employees (and
bargaining unit employees, as negotiated) of NU, including CL&P, PSNH, and WMECO, hired before 2006 (or as negotiated, for
bargaining unit employees). Benefits are based on years of service and the employees' highest eligible compensation during 60
consecutive months of employment. NU allocates net periodic pension expense to its subsidiaries based on the actual participant
demographic data for each subsidiary's participants. Benefit payments to participants and contributions are also tracked by the trustee
for each subsidiary. The actual investment return for the trust each year is allocated to each of the subsidiaries in proportion to the
investment return expected to be earned during the year. NU uses a December 31st measurement date for the Pension Plan. Pension
expense/(income) affecting Net income is as follows: