Eversource 2012 Annual Report Download - page 86

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for under the equity method of accounting. NU’s investment totaled $6 million and $4.6 million as of December 31, 2012 and 2011,
respectively, and NSTAR Electric's investment totaled $2.3 million and $3 million as of December 31, 2012 and 2011, respectively. The
NSTAR Electric investment was not included in NU consolidated as of December 31, 2011. As of December 31, 2012 and 2011, NU
also had an equity ownership interest of $6.8 million and $4.2 million in an energy investment fund, respectively.
Equity investments are included in Other Long-Term Assets on the accompanying consolidated balance sheets and net earnings
related to these equity investments are included in Other Income, Net on the accompanying consolidated statements of income.
K. Revenues
Regulated Companies: The Regulated companies' retail revenues are based on rates approved by the state regulatory commissions.
In general, rates can only be changed through formal proceedings with the state regulatory commissions. The Regulated companies'
rates are designed to recover their incurred costs, plus an allowed rate of return on certain unrecovered costs. The Regulated
companies also utilize regulatory commission-approved tracking mechanisms to recover certain costs on a fully-reconciling basis.
These tracking mechanisms require rates to be changed periodically, with overcollections refunded to customers or undercollections
collected from customers in future periods. Beginning in 2011, WMECO was allowed to establish a revenue decoupling mechanism to
recover a pre-established level of baseline distribution delivery service revenues per year, independent of actual customer usage. Such
decoupling mechanisms effectively break the relationship between kWhs consumed by customers and revenues recognized.
Energy purchases under derivative instruments are recorded in Purchased Power, Fuel, and Transmission, and sales of energy
associated with these purchases are recorded in Operating Revenues.
Regulated Companies' Unbilled Revenues: Because customers are billed throughout the month based on pre-determined cycles rather
than on a calendar month basis, an estimate of electricity or natural gas delivered to customers for which the customers have not yet
been billed is calculated as of the balance sheet date. Unbilled revenues are included in Operating Revenues on the consolidated
statements of income and are assets on the consolidated balance sheets. Actual amounts billed to customers when meter readings
become available may vary from the estimated amount.
The Regulated companies estimate unbilled sales monthly using the daily load cycle method. The daily load cycle method allocates
billed sales to the current calendar month based on the daily load for each billing cycle. The billed sales are subtracted from total
month load, net of delivery losses, to estimate unbilled sales. Unbilled revenues are estimated by first allocating unbilled sales to the
respective customer classes, then applying an estimated rate by customer class to those sales.
Regulated Companies' Transmission Revenues - Wholesale Rates: Wholesale transmission revenues are based on formula rates that
are approved by the FERC. Wholesale transmission revenues for CL&P, NSTAR Electric, PSNH, and WMECO are collected under the
ISO New England Inc. Transmission, Markets and Services Tariff (ISO-NE Tariff). The ISO-NE Tariff includes Regional Network
Service (RNS) and Schedule 21 - NU rate schedules to recover fees for transmission and other services for CL&P, PSNH and WMECO
and the Schedule 21 - NSTAR rate schedules recover fees and other services for NSTAR Electric. The RNS rate, administered by
ISO-NE and billed to all New England transmission users, including CL&P, NSTAR Electric, PSNH and WMECO's transmission
businesses, is reset on June 1st of each year and recovers the revenue requirements associated with transmission facilities that benefit
the entire New England region. The Schedule 21 - NU and Schedule 21 - NSTAR rates, administered by NU, recover the revenue
requirements for local transmission facilities and other transmission costs not recovered under the RNS rate. The Schedule 21 - NU
rate is reset on January 1st and June 1st of each year, while the Schedule 21 - NSTAR rate is reset on June 1st of each year. The
Schedule 21 - NU and Schedule 21 - NSTAR rate calculations recover total transmission revenue requirements net of revenues
received from other sources (i.e., RNS, rentals, etc.), thereby ensuring that NU recovers all of CL&P's, NSTAR Electric’s, PSNH's and
WMECO's regional and local revenue requirements as prescribed in the ISO-NE Tariff. The RNS and Schedule 21 - NU and Schedule
21 - NSTAR rates provide for the annual reconciliation and recovery or refund of estimated (or projected) costs to actual costs. The
financial impacts of differences between actual and projected costs are deferred for future recovery from, or refunded to, transmission
customers.
Regulated Companies' Transmission Revenues - Retail Rates: A significant portion of the NU transmission segment revenue comes
from ISO-NE charges to the distribution businesses of CL&P, NSTAR Electric, PSNH and WMECO, each of which recovers these costs
through rates charged to their retail customers. CL&P, NSTAR Electric, PSNH and WMECO each have a retail transmission cost
tracking mechanism as part of their rates, which allows the electric distribution companies to charge their retail customers for
transmission costs on a timely basis.