Eversource 2015 Annual Report Download - page 84

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As of December 31, 2014, the WMECO spent nuclear fuel trust included investments in money market funds of $4.3 million classified as Level 1 in
the fair value hierarchy, and $14.7 million of corporate debt securities, $14.5 million of asset-backed debt securities, $13 million of municipal bonds
and $11.6 million of other fixed income securities classified as Level 2 in the fair value hierarchy. The trust was liquidated in late 2015.
U.S. government issued debt securities are valued using market approaches that incorporate transactions for the same or similar bonds and
adjustments for yields and maturity dates. Corporate debt securities are valued using a market approach, utilizing recent trades of the same or similar
instrument and also incorporating yield curves, credit spreads and specific bond terms and conditions. Asset-backed debt securities include
collateralized mortgage obligations, commercial mortgage backed securities, and securities collateralized by auto loans, credit card loans or
receivables. Asset-backed debt securities are valued using recent trades of similar instruments, prepayment assumptions, yield curves, issuance and
maturity dates, and tranche information. Municipal bonds are valued using a market approach that incorporates reported trades and benchmark
yields. Other fixed income securities are valued using pricing models, quoted prices of securities with similar characteristics, and discounted cash
flows.
6. ASSET RETIREMENT OBLIGATIONS
Eversource, including CL&P, NSTAR Electric, PSNH and WMECO, recognizes a liability for the fair value of an ARO on the obligation date if the
liability’s fair value can be reasonably estimated and is conditional on a future event. Settlement dates and future costs are reasonably estimated
when sufficient information becomes available. Management has identified various categories of AROs, primarily certain assets containing asbestos
and hazardous contamination, and has performed fair value calculations reflecting expected probabilities for settlement scenarios.
The fair value of an ARO is recorded as a liability in Other Long-Term Liabilities with a corresponding amount included in Property, Plant and
Equipment, Net on the balance sheets. The ARO assets are depreciated, and the ARO liabilities are accreted over the estimated life of the obligation
with corresponding credits recorded as accumulated depreciation and ARO liabilities, respectively. As the Regulated companies are rate-regulated
on a cost-of-service basis, these companies apply regulatory accounting guidance and both the depreciation and accretion costs associated with the
Regulated companies’ AROs are recorded as increases to Regulatory Assets on the balance sheets.
A reconciliation of the beginning and ending carrying amounts of ARO liabilities are as follows:
Eversource As of December 31,
(Millions of Dollars) 2015 2014
Balance as of Beginning of Year $ 426.3 $ 424.9
Liabilities Incurred During the Year 6.6 1.3
Liabilities Settled During the Year (18.2)
(19.5)
Accretion 26.5 25.1
Revisions in Estimated Cash Flows (11.1)
(5.5)
Balance as of End of Year $ 430.1 $ 426.3
As of December 31,
2015 2014
NSTAR NSTAR
(Millions of Dollars) CL&P
Electric PSNH WMECO CL&P Electric PSNH WMECO
Balance as of Beginning of Year $ 35.3 $ 34.3 $ 20.6 $ 5.9 $ 35.0 $ 32.8 $ 19.5 $ 4.5
Liabilities Incurred During the Year - 6.2 0.4 - - - - 1.1
Liabilities Settled During the Year - (1.5) - (0.1) (1.1) - - -
Accretion 2.2 1.8 1.3 0.4 1.9 1.5 1.1 0.3
Revisions in Estimated Cash Flows (3.7) (5.5) (0.7) (0.5) (0.5) - - -
Balance as of End of Year $ 33.8 $ 35.3 $ 21.6 $ 5.7 $ 35.3 $ 34.3 $ 20.6 $ 5.9
Eversource’s amounts include CYAPC and YAEC’s AROs of $319.1 million and $317.3 million as of December 31, 2015 and 2014, respectively.
The fair value of the ARO for CYAPC and YAEC includes uncertainties of the fuel off-load dates related to the DOE’s timing of performance
regarding its obligation to dispose of the spent nuclear fuel and high level waste. The incremental asset recorded as an offset to the ARO liability
was fully depreciated since the plants have no remaining useful life. Any changes in the assumptions used to calculate the fair value of the ARO
liability are recorded with a corresponding offset to the related regulatory asset. The assets held in the CYAPC and YAEC nuclear decommissioning
trusts are restricted for settling the ARO and all other decommissioning obligations. For further information on the assets held in the nuclear
decommissioning trusts, see Note 5, “Marketable Securities,” to the financial statements.