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For the PBOP Plan, it is currently NU's policy to annually fund an amount equal to the PBOP Plan's postretirement benefit cost,
excluding curtailment and termination benefits. NU contributed $41.8 million for the year ended December 31, 2010 to fund the PBOP
Plan and expects to make $42.8 million in contributions to the PBOP Plan in 2011. NU makes an additional contribution to the PBOP
Plan for the amounts received from the federal Medicare subsidy. This amount was $3.8 million in 2010 and is estimated to be $4.1
million in 2011.
B. Defined Contribution Plans
NU maintains a 401(k) Savings Plan for substantially all NU employees, including CL&P, PSNH and WMECO employees. This savings
plan provides for employee contributions up to specified limits. NU matches employee contributions up to a maximum of three percent
of eligible compensation with one percent in cash and two percent in NU common shares allocated from the ESOP. The 401(k)
matching contributions of cash and NU common shares made by NU were $12.7 million ($4 million for CL&P, $2.4 million for PSNH and
$0.8 million for WMECO) in 2010, $12.2 million ($3.9 million for CL&P, $2.3 million for PSNH and $0.7 million for WMECO) in 2009, and
$12 million ($4 million for CL&P, $2.3 million for PSNH and $0.7 million for WMECO) in 2008.
Effective on January 1, 2006, all newly hired, non-bargaining unit employees, and effective on January 1, 2007 or as subject to
collective bargaining agreements, certain newly hired bargaining unit employees participate in a new program under the 401(k) Savings
Plan called the K-Vantage benefit. These employees are not eligible to participate in the Pension Plan. In addition, participants in the
Pension Plan as of January 1, 2006 were given the opportunity to choose to become a participant in the K-Vantage benefit beginning in
2007, in which case their benefit under the Pension Plan would be frozen. NU makes contributions to the K-Vantage benefit based on
a percentage of participants' eligible compensation, as defined by the benefit document. The contributions made by NU were $3.4
million ($0.4 million for CL&P, $0.4 million for PSNH and $0.1 million for WMECO) in 2010, $2.6 million (de minimis amounts for CL&P
and WMECO and $0.3 million for PSNH) in 2009, and $2 million (de minimis amounts for CL&P and WMECO and $0.3 million for
PSNH) in 2008.
C. Employee Stock Ownership Plan
NU maintains an ESOP for purposes of allocating shares to NU, CL&P, PSNH, and WMECO's employees participating in NU's 401(k)
Savings Plan. NU issued unsecured notes during 1991 and 1992 totaling $250 million, the proceeds of which were loaned to the ESOP
trust (ESOP Notes) for the purchase of 10.8 million newly issued NU common shares (ESOP shares). The ESOP trust was obligated to
make principal and interest payments to NU on the ESOP Notes at the same rate that ESOP shares were allocated to employee
accounts in the 401(k) Savings Plan. Under this arrangement, NU made annual contributions to the ESOP trust equal to the ESOP's
debt service, less dividends received by the ESOP. NU's contributions to the ESOP trust for the years ended December 31, 2010,
2009 and 2008 totaled $1.1 million, $6.1 million and $6 million, respectively. During 2010, the ESOP Notes were fully repaid and all
ESOP shares purchased with the proceeds of the ESOP Notes were fully allocated. Following complete allocation of the ESOP shares
in 2010, continuing allocations of NU common shares were made from NU treasury shares to satisfy the 401(k) Savings Plan obligation
to provide a portion of the matching contribution in NU common shares.
For treasury shares used to satisfy the 401(k) Savings Plan matching contributions, compensation expense is recognized equal to the
fair value of shares that have been allocated to participants. Any difference between the fair value and the average cost of the
allocated treasury shares is charged or credited to Capital Surplus, Paid In. For the years ended December 31, 2010, 2009 and 2008,
NU recognized $8.5 million, $8.2 million and $8 million, respectively, of expense related to the ESOP.
Dividends on the ESOP unallocated shares are not considered dividends for financial reporting purposes. During the first and second
quarters of 2008, NU paid a $0.20 per share quarterly dividend. During the third and fourth quarters of 2008, NU paid a $0.2125 per
share quarterly dividend. NU paid a $0.2375 per share quarterly dividend in 2009 and a $0.25625 per share quarterly dividend in 2010.
In 2010 and 2009, the ESOP trust allocated 127,054 and 542,724 of NU common shares, respectively, to satisfy 401(k) Savings Plan
obligations to employees. As of December 31, 2010, total allocated ESOP shares were 10,800,185 and there were no unallocated
ESOP shares remaining. As of December 31, 2009, total allocated ESOP shares were 10,673,131 and total unallocated ESOP shares
were 127,054. The fair market value of the unallocated ESOP shares as of December 31, 2009 was $3.3 million.
D. Share-Based Payments
NU maintains an ESPP and other long-term equity-based incentive plans under the NU Incentive Plan in which NU, CL&P, PSNH, and
WMECO employees and officers are entitled to participate. NU, CL&P, PSNH, and WMECO record compensation cost related to these
plans, as applicable, for shares issued or sold to NU, CL&P, PSNH, and WMECO employees and officers, as well as the allocation of
costs associated with shares issued or sold to NUSCO employees and officers that support CL&P, PSNH, and WMECO.
In accordance with accounting guidance for share-based payments, share-based compensation awards are recorded using the fair
value-based method based on the fair value at the date of grant. This guidance applies to share-based compensation awards granted
on or after January 1, 2006 or to awards for which the requisite service period has not been completed.
NU accounts for its various share-based plans as follows:
• For grants of restricted shares and RSUs, NU records compensation expense, net of estimated forfeitures, on a straight-line basis
over the vesting period based upon the fair value of NU's common shares at the date of grant. Dividend equivalents on RSUs are
charged to retained earnings, net of estimated forfeitures.