Eversource 2013 Annual Report Download - page 88

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Regulatory Assets - The following provides further information about regulatory assets:
Benefit Costs: NU's Pension, SERP and PBOP Plans are accounted for in accordance with accounting guidance on defined benefit
pension and other postretirement plans. Because the Regulated companies recover the retiree benefit costs from customers through
rates, regulatory assets are recorded in lieu of a charge to Accumulated Other Comprehensive Income/(Loss) to reflect the liability that
is recognized for the funded status of the pension and other postretirement plans and is remeasured annually. Regulatory accounting
was also applied to the portions of NU's service company costs that support the Regulated companies, as these amounts are also
recoverable. CL&P, NSTAR Electric, PSNH and WMECO do not collect carrying charges on these benefit costs regulatory assets.
CL&P, NSTAR Electric, PSNH and WMECO recover benefit costs related to their distribution and transmission operations from
customers in rates as allowed by their applicable regulatory commissions. NSTAR Electric and WMECO each recover their qualified
pension and postretirement expenses related to distribution operations through rate reconciling mechanisms that fully track the change
in net pension and postretirement expenses each year. NSTAR Electric earns a carrying charge on the excess cumulative benefit plan
trust fund contributions it has made over what it has cumulatively recognized as net periodic benefit expense, net of deferred income
taxes. As of December 31, 2013 and 2012, these balances were $379.9 million and $366.8 million of the total benefit costs regulatory
asset, respectively.
Derivative Liabilities: Regulatory assets recorded as an offset to derivative liabilities relate to the fair value of contracts used to
purchase energy and energy-related products that will be recovered from customers in future rates. See Note 5, "Derivative
Instruments," to the financial statements for further information. These assets are excluded from rate base and are being recovered as
the actual settlements occur over the duration of the contracts.
Goodwill: The goodwill regulatory asset originated from the transaction that created NSTAR in 1999. This regulatory asset is currently
being amortized and recovered from customers in rates without a carrying charge over a 40-year period (as of December 31, 2013,
there were 26 years of amortization remaining).
Storm Restoration Costs: The storm restoration cost deferrals relate to costs incurred at CL&P, NSTAR Electric, PSNH and WMECO
that each company expects to recover from customers. A storm must meet certain criteria to be declared a major storm with the criteria
specific to each state jurisdiction and utility company as follows:
• Connecticut - qualifying storm restoration costs must exceed $5 million for a storm to be declared a major storm;
• Massachusetts - qualifying storm restoration costs must exceed $1 million for NSTAR Electric and $300,000 for WMECO
and an emergency response plan must be initiated for a storm to be declared a major storm; and
• New Hampshire - For a storm to be declared a major storm: (1) at least 10 percent of customers must be without power
with at least 200 concurrent locations requiring repairs (trouble spots), or (2) at least 300 concurrent trouble spots must be
reported.
Once a storm is declared major, all qualifying expenses prudently incurred during storm restoration efforts are deferred and recovered
from customers.
In addition to storm restoration costs, PSNH is allowed recovery of prudently incurred storm pre-staging costs in accordance with
NHPUC regulation.
In 2013, 2012 and 2011, CL&P, NSTAR Electric, PSNH and WMECO experienced significant storms, including Tropical Storm Irene,
the October 2011 snowstorm, Storm Sandy, and the February 2013 blizzard. As a result of these storm events, each Company suffered
extensive damage to its distribution and transmission systems resulting in customer outages, which required the incurrence of costs to
repair damage and restore customer service. The storm restoration cost regulatory asset balance at CL&P, NSTAR Electric, PSNH
and WMECO reflects costs incurred for major storm events. Management believes the storm restoration costs were prudent and meet
the criteria for specific cost recovery in Connecticut, Massachusetts and New Hampshire and as a result, are probable of recovery.
Storm Filings: Each electric utility is seeking recovery of its deferred storm restoration costs through its applicable regulatory recovery
process.
On February 3, 2014, the PURA issued a draft decision on CL&P’s request to recover storm restoration costs associated with five major
storms, all of which occurred in 2011 and 2012. In its draft decision, the PURA approved recovery of $365 million of deferred storm
restoration costs and ordered CL&P to capitalize approximately $18 million of the deferred storm restoration costs as utility plant, which
will be included in depreciation expense in future rate proceedings. PURA will allow recovery of the $365 million with carrying charges
in CL&P’s distribution rates over a six-year period beginning December 1, 2014. The remaining costs were either disallowed or are
probable of recovery in future rates and did not have a material impact on CL&P’s financial position, results of operations or cash flows.
On December 30, 2013, the DPU approved NSTAR Electric’s request to recover storm restoration costs, plus carrying costs, related to
Tropical Storm Irene and the October 2011 snowstorm. The DPU approved recovery of $34.2 million of the $38 million requested
costs. NSTAR Electric will recover these costs, plus carrying costs, in its distribution rates over a five-year period beginning on
January 1, 2014.