Eversource 2012 Annual Report Download - page 92

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regulatory costs as of December 31, 2011. These amounts represent incurred costs that have not yet been approved for recovery by
the applicable regulatory agency. Management believes it is probable that recovery of these costs will ultimately be approved.
For PSNH, of the total December 31, 2012 regulatory costs not yet approved, $12.1 million related to costs incurred for the 2012
Hurricane Sandy storm and $22.3 million related to costs incurred for the 2011 Tropical Storm Irene and the October snowstorm
restorations that met the NHPUC criteria for cost deferral. As of December 31, 2011, the storm restoration costs incurred for the 2011
Tropical Storm Irene and the October snowstorm restorations totaled $21.7 million. Refer to the "Storm Restoration Costs" section
below for further discussion. The NSTAR Electric balance as of December 31, 2012 and 2011 related to costs deferred in connection
with the basic service bad debt adder. See Note 12H, "Commitments and Contingencies – Basic Service Bad Debt Adder," for further
information.
Equity Return on Regulatory Assets: For rate-making purposes, the Regulated companies recover the carrying cost, including an
allowed equity return, on certain regulatory assets. This equity return, which is not recorded on the accompanying consolidated
balance sheets, totaled $2.5 million and $3.5 million for CL&P and $21.8 million and $7.6 million for PSNH as of December 31, 2012
and 2011, respectively. These carrying costs will be recovered in future rates.
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. Under this accounting guidance, the funded status of pension and other postretirement plans
is recorded with an offset to Accumulated Other Comprehensive Income/(Loss) and is remeasured annually. However, because the
Regulated companies recover these costs from customers through rates, regulatory assets are recorded as an offset for the liability that
is recognized for the funded status of the pension and postretirement plans. Regulatory accounting was also applied to the portions of
the NUSCO and NSTAR Electric & Gas costs that support the Regulated companies, as these amounts are also recoverable. CL&P
and PSNH do not collect carrying charges on these deferred benefit costs regulatory assets. WMECO's deferred benefit costs
regulatory assets are earning a return at the same rate as the assets included in rate base. NSTAR Electric does not earn a return on
the regulatory assets recorded to offset the funded status.
NSTAR Electric and WMECO each recover their qualified pension and postretirement expenses through rate reconciling mechanisms
that fully track the change in net pension and postretirement expenses each year. CL&P and PSNH will recover benefit costs through
rates as allowed by their applicable regulatory commissions. 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, 2012 and 2011, these balances were $366.8 million and $428 million of the benefit costs regulatory
asset, respectively.
Regulatory Assets Offsetting Derivative Liabilities: The regulatory assets offsetting derivative liabilities relate to the fair value of
contracts used to purchase power and other related contracts that will be collected from customers in the future. See Note 5,
"Derivative Instruments," to the consolidated financial statements for further information. These assets are excluded from rate base
and are being recovered as the actual settlement occurs over the duration of the contracts.
Goodwill: Goodwill that originated from the merger that created NSTAR in 1999 is recoverable in rates over the remaining 27 year
amortization period, without a carrying charge.
Storm Restoration Costs: The storm restoration cost deferrals relate to costs incurred at CL&P, NSTAR Electric, PSNH and WMECO
for restorations that the Company expects to collect 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. Once a storm is declared major, all qualifying expenses incurred
during storm restoration efforts, if deemed prudent, are deferred and recovered from customers in future periods. In Connecticut,
qualifying storm restoration costs must exceed $5 million for a storm to be declared a major storm. In 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. In New Hampshire, (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 for a
storm to be declared a major storm.
In 2011, Tropical Storm Irene and the October snowstorm each caused extensive damage to NU’s distribution system. As of
December 31, 2012 and 2011, CL&P had recorded total deferred storm restoration costs relating to Tropical Storm Irene and the
October 2011 snowstorm as a regulatory asset of $281.6 million and $263.3 million, respectively. The CL&P storm restoration cost
regulatory asset balance includes a reserve of $40 million recorded in connection with the Connecticut settlement agreement. See
Note 2, "Merger of NU and NSTAR," for further information. As of December 31, 2012 and 2011, NSTAR Electric had recorded total
deferred storm restoration costs for these 2011 storms of $35.8 million and $35.8 million, respectively, and WMECO had recorded
$26.5 million and $26.7 million, respectively, as regulatory assets. PSNH recorded $22.3 million and $21.7 million for these 2011
storms in Other Long-Term Assets, as of December 31, 2012 and 2011, respectively, as previously described.
On August 1, 2012, PURA issued a final decision in the investigation of CL&P’s performance related to both Tropical Storm Irene and
the October 2011 snowstorm. The decision concluded that CL&P was deficient and inadequate in its preparation, response, and
communication to both storms, and identified certain penalties that could be imposed on CL&P during its next rate case, including a
reduction in allowed regulatory ROE and the disallowance of certain deferred storm restoration costs. However, PURA will consider
and weigh the extent to which CL&P has taken steps in its restructuring of storm management and the establishment of new practices