Eversource 2012 Annual Report Download - page 61

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businesses through 2013. This extended stimulus is expected to provide us with cash flow benefits of between $200 million to $250
million in 2013 and 2014. We are still evaluating the other provisions of this legislation, which are not expected to have a significant
impact on our financial position, results of operations or cash flows.
Connecticut:
Enhancing Emergency Preparedness and Response Act: On June 15, 2012, Connecticut enacted the "Enhancing Emergency
Preparedness and Response Act," which is intended to enhance the state’s emergency preparedness and response in the event of
natural disasters. Among numerous provisions, the bill requires the PURA to establish emergency performance standards for utilities
and allows the PURA to levy penalties of up to 2.5 percent of annual distribution revenues for failure to meet performance standards.
For further information, see "Regulatory Developments and Rate Matters – Connecticut" in this Management's Discussion and Analysis.
Comprehensive Energy Strategy: On February 19, 2013, Connecticut issued a final comprehensive energy strategy (strategy). The
strategy includes a series of policy proposals that aim to expand energy choices, improve environmental conditions, create clean
energy jobs, and enhance the quality of life for customers in the state. It also includes a seven-year initiative for expanding natural gas
use with a goal of providing nearly 300,000 utility customers with access to natural gas, building an estimated 900 miles of new natural
gas mains, and estimates of capital costs to be incurred by natural gas utility companies to connect customers on or near natural gas
mains. In addition to natural gas expansion, the strategy also calls for a significant expansion of energy efficiency investment in
Connecticut, a review of Connecticut’s Renewable Energy Portfolio Standards (possibly including Canadian hydroelectric generation as
a qualifying resource), and investment in alternative fuel transportation. Many of the recommendations in the strategy will require
actions by the PURA and potentially the legislature. As such, the full impact of the strategy is not reflected in our electric distribution,
transmission or natural gas business segments five-year capital program.
Massachusetts:
Energy Act: On August 3, 2012, Massachusetts Governor Patrick signed into law "An Act Relative to Competitively Priced Electricity in
the Commonwealth" (Energy Act). The more significant provisions of the Energy Act impacting our Massachusetts operating
companies and customers are as follows:
 Requires electric utility companies to file a distribution rate case every five years and natural gas companies every 10
years, limiting those companies to one settlement agreement in a 10-year period;
 Extends the distribution rate case review period to 10 months;
 Requires all distribution companies, through a competitive bidding process and subject to DPU approval, to enter into
additional cost-effective long-term renewable energy contracts with terms of 10 to 20 years. Electric utility companies will
be allowed a remuneration of 2.75 percent of the annual payments under the contracts to compensate them for accepting
the financial obligation of the contracts;
 Orders the DPU to open a proceeding for each electric and natural gas utility company to identify reconciliation factors
and establish cost recovery from each customer class under cost-based criteria; and
 Allows electric utility or distribution companies to construct, own and operate no more than 25 MW of solar generation
facilities, a decrease from the initial allowance of up to 50 MW of solar generation facilities, subject to DPU approval, and
requires that construction be completed prior to June 30, 2015.
Storm Response Act: On August 6, 2012, Massachusetts Governor Patrick signed into law "an act relative to emergency service
response of public utility companies" (Storm Response Act), to help improve utility companies’ emergency response and
communication. The Storm Response Act codified certain emergency response plan (ERP) provisions, which require utility companies
to submit an annual ERP for DPU review and approval. The ERP will describe storm or emergency responsibilities of utility company
employees, customer communication processes and systems, and deployment of resources. The Storm Response Act also requires
that all future financial penalties levied on utility companies by the DPU for violation of DPU storm and emergency service performance
standards will be provided to customers, and that transmission companies performing vegetation management activities within a right-
of-way comply with certain notification provisions. We are currently evaluating this act and its potential impacts on NSTAR Electric’s,
NSTAR Gas’ and WMECO’s financial positions, results of operations and cash flows; however, we do not expect the impacts to be
material.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and, at times,
difficult, subjective or complex judgments. Changes in these estimates, assumptions and judgments, in and of themselves, could
materially impact our financial position, results of operations or cash flows. Our management communicates to and discusses with the
Audit Committee of our Board of Trustees significant matters relating to critical accounting policies. Our critical accounting policies are
discussed below. See the combined notes to our consolidated financial statements for further information concerning the accounting
policies, estimates and assumptions used in the preparation of our consolidated financial statements.
Regulatory Accounting: The accounting policies of the Regulated companies conform to GAAP applicable to rate-regulated enterprises
and reflect the effects of the rate-making process.
The application of accounting guidance applicable to 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. In some cases, we