Eversource 2012 Annual Report Download - page 97

84
The following table summarizes average useful lives of depreciable assets:
Average Depreciable Life
(Years)
NU
CL&P
NSTAR Electric
PSNH
WMECO
Distribution
42.1
41.8
33.9
33.8
30.2
Transmission
45.3
39.8
46.3
42.1
47.5
Generation
32.7
-
-
32.8
25.0
Other
16.7
-
-
-
-
5. DERIVATIVE INSTRUMENTS
The Regulated companies purchase and procure energy and energy-related products for their customers, which are subject to price
volatility. The costs associated with supplying energy to customers are recoverable through customer rates. The Regulated companies
manage the risks associated with the price volatility of energy and energy-related products through the use of derivative contracts,
many of which meet the definition of and are designated as "normal purchases or normal sales" (normal) under the applicable
accounting guidance, and the use of nonderivative contracts.
Derivative contracts that are not recorded as normal are recorded at fair value as current or long-term derivative assets or liabilities.
For the Regulated companies, regulatory assets or liabilities are recorded for the changes in fair values of derivatives, as costs are, and
management believes they will continue to be, recovered from or refunded in customers rates. For NU's remaining unregulated
wholesale marketing contracts, changes in fair values of derivatives are included in Net Income. The costs and benefits of derivative
contracts that meet the definition of normal are recognized in Operating Expenses or Operating Revenues on the accompanying
consolidated statements of income, as applicable, as electricity or natural gas is delivered.
CL&P, NSTAR Electric and WMECO mitigate the risks associated with the price volatility of energy and energy-related products
through the use of SS, LRS, and basic service contracts, which fix the price of electricity purchased for customers and are accounted
for as normal. CL&P, NSTAR Electric and WMECO have entered into derivative and nonderivative contracts for the purchase of energy
and energy-related products and contracts that are derivatives. NU also has NYMEX future contracts in order to reduce variability
associated with the purchase price of approximately 11.5 million MMBtu of natural gas.
The costs or benefits from all of the Regulated companies' derivative contracts are recoverable from or refundable to customers, and
therefore, changes in fair value are recorded as Regulatory Assets or Regulatory Liabilities on the accompanying consolidated balance
sheets.
NU, through Select Energy, has one remaining fixed price forward sales contract that expires on December 31, 2013 to serve electrical
load that is part of its remaining unregulated wholesale energy marketing portfolio. NU mitigates the price risk associated with this
contract through the use of several forward purchase contracts. The contracts are accounted for at fair value, and changes in their fair
values are recorded in Purchased Power, Fuel and Transmission on the accompanying consolidated statements of income.
The gross fair values of derivative assets and liabilities with the same counterparty are offset and reported as net Derivative Assets or
Derivative Liabilities, with current and long-term portions, in the accompanying consolidated balance sheets. Cash collateral posted or
collected under master netting agreements is recorded as an offset to the derivative asset or liability. The following tables present the
gross fair values of contracts categorized by risk type and the net amounts recorded as current or long-term derivative asset or liability: