Eversource 2010 Annual Report Download - page 96

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CL&P mitigates the risks associated with the price volatility of energy and energy-related products through the use of SS or LRS
contracts, which fix the price of electricity purchased for customers for periods of time ranging from three months to three years and are
accounted for as normal. CL&P has entered into derivatives, including FTR contracts and bilateral basis swaps, to manage the risk of
congestion costs associated with its SS and LRS contracts. As required by regulation, CL&P has also entered into derivative and
nonderivative contracts for the purchase of energy and energy-related products and contracts related to capacity. While the risks
managed by these contracts are regional congestion costs and capacity price risks that are not specific to CL&P, Connecticut's electric
distribution companies, including CL&P, are required to enter into these contracts. Management believes any costs or benefits from
these contracts are recoverable from or will be refunded to CL&P's customers, and, therefore any changes in fair value are recorded as
Regulatory Assets and Regulatory Liabilities on the accompanying consolidated balance sheets.
WMECO mitigates the risks associated with the volatility of the prices of energy and energy-related products in procuring energy supply
for its customers through the use of basic service contracts, which fix the price of electricity purchased for customers for periods of time
ranging from three months to three years and are accounted for as normal.
PSNH mitigates the risks associated with the volatility of energy prices in procuring energy supply for its customers through its
generation facilities and the use of derivative contracts, including energy forward contracts, options and FTRs. PSNH enters into these
contracts in order to stabilize electricity prices for customers. Management believes any costs or benefits from these contracts are
recoverable from or will be refunded to PSNH's customers, and, therefore any changes in fair value are recorded as Regulatory Assets
and Regulatory Liabilities on the accompanying consolidated balance sheets.
NU, through Yankee Gas, mitigates the risks associated with supply availability and volatility of natural gas prices through the use of
storage facilities and agreements to purchase natural gas supply for customers. The costs associated with mitigating these risks are
recoverable from customers, and, therefore any changes in fair value are recorded as Regulatory Assets and Regulatory Liabilities on
the accompanying consolidated balance sheets.
NU Enterprises, through Select Energy, has one remaining fixed price forward sales contract to serve electrical load that is part of its
wholesale energy marketing portfolio. NU Enterprises mitigates the price risk associated with this contract through the use of forward
purchase and sales contracts. NU Enterprises' derivative contracts are accounted for at fair value, and changes in their fair values are
recorded in Operating Expenses on the accompanying consolidated statements of income.
NU is also exposed to interest rate risk associated with its long-term debt. From time to time, various subsidiaries of the Company
enter into forward starting interest rate swaps, accounted for as cash flow hedges, to mitigate the risk of changes in interest rates when
they expect to issue long-term debt. NU parent has also entered into an interest rate swap on fixed rate long-term debt in order to
manage the balance of its fixed and floating rate debt. This interest rate swap is accounted for as a fair value hedge.