Eversource 2014 Annual Report Download - page 53

41
to order the divestiture of all or some of PSNH's generation assets if the NHPUC finds it is in the economic interest of customers to do so. The law
also clarified the definition of "stranded costs" to include costs approved for recovery by the NHPUC in connection with the divestiture or retirement
of PSNH's generation assets.
In the event of generation asset divestiture or retirement, present law and the PSNH Restructuring Settlement Agreement approved in 2000 require
that the NHPUC provide recovery of any stranded costs by PSNH. We continue to believe generation investments and prudently-incurred costs
remain probable of recovery.
Legislative and Policy Matters

On December 19, 2014, the "Tax Increase Prevention Act of 2014" became law, which extended the accelerated deduction of depreciation to
businesses through 2014. This extended stimulus provides NU with cash flow benefits of approximately $200 million (approximately $70 million at
CL&P) in 2015.

On July 7, 2014, Massachusetts enacted "An Act Relative to Natural Gas Leaks" (the Act). The Act establishes a uniform natural gas leak
classification standard for all Massachusetts natural gas utilities and a program that accelerates the replacement of aging natural gas infrastructure.
The program will enable companies, including NSTAR Gas, to better manage the scheduling and costs of replacement. The Act also calls for the
DPU to authorize natural gas utilities to design and offer programs to customers that will increase the availability, affordability and feasibility of
natural gas service for new customers. On October 31, 2014, NSTAR Gas filed the GSEP with the DPU. We expect a decision on the program in
April 2015.
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 financial statements for further information concerning the accounting policies, estimates and assumptions used in the preparation of our financial
statements.
 The accounting policies of the Regulated companies follow the application of accounting guidance for entities with rate-
regulated operations and reflect the effects of the rate-making process.
The application of accounting guidance for 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. Regulatory assets are amortized as the incurred costs are
recovered through customer rates. In some cases, we record regulatory assets before approval for recovery has been received from the applicable
regulatory commission. We must use judgment to conclude that costs deferred as regulatory assets are probable of future recovery. We base our
conclusion on certain factors, including, but not limited to, regulatory precedent. Regulatory liabilities represent revenues received from customers
to fund expected costs that have not yet been incurred or probable future refunds to customers.
We use our best judgment when recording regulatory assets and liabilities; however, regulatory commissions can reach different conclusions about
the recovery of costs, and those conclusions could have a material impact on our financial statements. We believe it is probable that the Regulated
companies will recover the regulatory assets that have been recorded. If we determined that we could no longer apply the accounting guidance
applicable to rate-regulated enterprises to our operations, or that we could not conclude that it is probable that costs would be recovered from
customers in future rates, the costs would be charged to earnings in the period in which the determination is made.
 The determination of retail energy sales to residential, commercial and industrial customers is based on the reading of meters,
which occurs regularly throughout the month. Billed revenues are based on these meter readings, and the majority of recorded annual revenues is
based on actual billings. 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 represent an estimate of electricity or natural gas delivered to customers but not yet billed. Unbilled revenues are included in
Operating Revenues on the statement of income and are assets on the balance sheet that are reclassified to Accounts Receivable in the following
month as customers are billed. Such estimates are subject to adjustment when actual meter readings become available, when there is a change in
estimates and under other circumstances.
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. The estimate of unbilled revenues is sensitive to numerous factors, such as energy demands,
weather and changes in the composition of customer classes that can significantly impact the amount of revenues recorded.