eversourcea01.jpgeversourcelogo.jpg
 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 20172018
 or
¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE     
SECURITIES EXCHANGE ACT OF 1934
 

For the transition period from ____________ to ____________


Commission
File Number
Registrant; State of Incorporation;
Address; and Telephone Number
I.R.S. Employer
Identification No.
   
1-5324
EVERSOURCE ENERGY
(a Massachusetts voluntary association)
300 Cadwell Drive
Springfield, Massachusetts 01104
Telephone:  (800) 286-5000
04-2147929
   
0-00404
THE CONNECTICUT LIGHT AND POWER COMPANY
(a Connecticut corporation)
107 Selden Street
Berlin, Connecticut 06037-1616
Telephone:  (800) 286-5000
06-0303850
   
1-02301
NSTAR ELECTRIC COMPANY
(a Massachusetts corporation)
800 Boylston Street
Boston, Massachusetts 02199
Telephone:  (800) 286-5000
04-1278810
   
1-6392
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
(a New Hampshire corporation)
Energy Park
780 North Commercial Street
Manchester, New Hampshire 03101-1134
Telephone:  (800) 286-5000
02-0181050
   
0-7624
WESTERN MASSACHUSETTS ELECTRIC COMPANY
(a Massachusetts corporation)
300 Cadwell Drive
Springfield, Massachusetts 01104
Telephone:  (800) 286-5000
04-1961130


  


Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
 YesNo
 x¨

Indicate by check mark whether the registrants have submitted electronically and posted on its corporate Web sites, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).
 YesNo
 x¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large
accelerated filer
 
Accelerated
filer
 
Non-accelerated
filer
 Smaller reporting company Emerging growth company
          
Eversource Energyx ¨ ¨ ¨ ¨
The Connecticut Light and Power Company¨ ¨ x ¨ ¨
NSTAR Electric Company¨ ¨ x ¨ ¨
Public Service Company of New Hampshire¨ ¨ x ¨ ¨
Western Massachusetts Electric Company¨¨x¨¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act):
 YesNo
   
Eversource Energy¨x
The Connecticut Light and Power Company¨x
NSTAR Electric Company¨x
Public Service Company of New Hampshire¨x
Western Massachusetts Electric Company¨x

Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date:
Company - Class of StockOutstanding as of October 31, 20172018
  
Eversource Energy Common Shares, $5.00 par value316,885,808 shares
The Connecticut Light and Power Company Common Stock, $10.00 par value6,035,205 shares
NSTAR Electric Company Common Stock, $1.00 par value100200 shares
Public Service Company of New Hampshire Common Stock, $1.00 par value301 shares
Western Massachusetts Electric Company Common Stock, $25.00 par value434,653 shares

Eversource Energy holds all of the 6,035,205 shares, 100 shares, 301200 shares, and 434,653301 shares of the outstanding common stock of The Connecticut Light and Power Company, NSTAR Electric Company, and Public Service Company of New Hampshire, and Western Massachusetts Electric Company, respectively.

NSTAR Electric Company and Public Service Company of New Hampshire and Western Massachusetts Electric Company each meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q, and each is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) of Form 10-Q.10‑Q.

Eversource Energy, The Connecticut Light and Power Company, NSTAR Electric Company, and Public Service Company of New Hampshire and Western Massachusetts Electric Company each separately file this combined Form 10-Q.  Information contained herein relating to any individual registrant is filed by such registrant on its own behalf.  Each registrant makes no representation as to information relating to the other registrants.  


GLOSSARY OF TERMS

The following is a glossary of abbreviations and acronyms that are found in this report:
Current or former Eversource Energy companies, segments or investments:
Eversource, ES or the CompanyEversource Energy and subsidiaries
Eversource parent or ES parentEversource Energy, a public utility holding company
ES parent and other companiesES parent and other companies are comprised of Eversource parent, Eversource Service and other subsidiaries, which primarily includes our unregulated businesses, HWP Company, The Rocky River Realty Company (a real estate subsidiary), and the consolidated operations of CYAPC and YAEC
CL&PThe Connecticut Light and Power Company
NSTAR ElectricNSTAR Electric Company
PSNHPublic Service Company of New Hampshire
WMECOWestern Massachusetts Electric Company
NSTAR GasNSTAR Gas Company
Yankee GasYankee Gas Services Company
AquarionEversource Aquarion Holdings, Inc and its subsidiaries (formerly known as Macquarie Utilities Inc)
NPTNorthern Pass Transmission LLC
Northern PassThe HVDC and associated alternating-current transmission line project from Canada into New Hampshire
Eversource ServiceEversource Energy Service Company
Bay State WindA project being developed jointly by Eversource and Denmark-based Ørsted (formerly known as DONG Energy) to construct an offshore wind farm off the coast of Massachusetts
CYAPCConnecticut Yankee Atomic Power Company
MYAPCMaine Yankee Atomic Power Company
YAECYankee Atomic Electric Company
Yankee CompaniesCYAPC, YAEC and MYAPC
Regulated companiesThe Eversource Regulatedregulated companies are comprised of the electric distribution and transmission businesses of CL&P, NSTAR Electric PSNH, and WMECO,PSNH, the natural gas distribution businesses of Yankee Gas and NSTAR Gas, NPT, andAquarion, the generation activitiesfacilities of PSNH, and WMECO
the solar power facilities of NSTAR Electric
Regulators: 
DEEPConnecticut Department of Energy and Environmental Protection
DOEU.S. Department of Energy
DOERMassachusetts Department of Energy Resources
DPUMassachusetts Department of Public Utilities
EPAU.S. Environmental Protection Agency
FERCFederal Energy Regulatory Commission
ISO-NEISO New England, Inc., the New England Independent System Operator
MA DEPMassachusetts Department of Environmental Protection
NHPUCNew Hampshire Public Utilities Commission
PURAConnecticut Public Utilities Regulatory Authority
SECU.S. Securities and Exchange Commission
SJCSupreme Judicial Court of Massachusetts
Other Terms and Abbreviations:
Access NortheastA project being developed jointly by Eversource, Enbridge, Inc. ("Enbridge"), and National Grid plc ("National Grid") through Algonquin Gas Transmission, LLC ("AGT") to bring needed additional natural gas pipeline and storage capacity to New England.
ADITAccumulated Deferred Income Taxes
AFUDCAllowance For Funds Used During Construction
AOCLAOCIAccumulated Other Comprehensive Loss
AquarionAquarion Water CompanyIncome
AROAsset Retirement Obligation
BcfBillion cubic feet
C&LMConservation and Load Management
CfDContract for Differences
Clean Air ProjectThe construction of a wet flue gas desulphurization system, known as "scrubber technology," to reduce mercury emissions of the Merrimack coal-fired generation station in Bow, New Hampshire
CO2
Carbon dioxide
CPSLCapital Projects Scheduling List
CTACompetitive Transition Assessment
CWIPConstruction Work in Progress
EDCElectric distribution company
EPSEarnings Per Share
ERISAEmployee Retirement Income Security Act of 1974

i



ERISAEmployee Retirement Income Security Act of 1974
ESOPEmployee Stock Ownership Plan
ESPPEmployee Share Purchase Plan
Eversource 20162017 Form 10-KThe Eversource Energy and Subsidiaries 20162017 combined Annual Report on Form 10-K as filed with the SEC
FERC ALJFERC Administrative Law Judge
FitchFitch Ratings
FMCCFederally Mandated Congestion Charge
FTRFinancial Transmission Rights
GAAPAccounting principles generally accepted in the United States of America
GSCGeneration Service Charge
GSRPGreater Springfield Reliability Project
GWhGigawatt-Hours
HQHydro-Québec, a corporation wholly-owned by the Québec government, including its divisions that produce, transmit and distribute electricity in Québec, Canada
HVDCHigh-voltage direct current
Hydro Renewable EnergyHydro Renewable Energy, Inc., a wholly-owned subsidiary of Hydro-Québec
IPPIndependent Power Producers
ISO-NE TariffISO-NE FERC Transmission, Markets and Services Tariff
kVKilovolt
kVaKilovolt-ampere
kWKilowatt (equal to one thousand watts)
kWhKilowatt-Hours (the basic unit of electricity energy equal to one kilowatt of power supplied for one hour)
LBRLost Base Revenue
LNGLiquefied natural gas
LRSSupplier of last resort service
MMcfMGMillion cubic feetgallons
MGPManufactured Gas Plant
MMBtuOne million British thermal units
MMcfMillion cubic feet
Moody'sMoody's Investors Services, Inc.
MWMegawatt
MWhMegawatt-Hours
NEEWSNew England East-West Solution
NETOsNew England Transmission Owners (including Eversource, National Grid and Avangrid)
NOx
Nitrogen oxides
OCIOther Comprehensive Income/(Loss)
PAMPension and PBOP Rate Adjustment Mechanism
PBOPPostretirement Benefits Other Than Pension
PBOP PlanPostretirement Benefits Other Than Pension Plan that provides certain retiree benefits, primarily medical, dental and life insurance
PCRBsPollution Control Revenue Bonds
Pension PlanSingle uniform noncontributory defined benefit retirement plan
PPAPension Protection Act
RRBsRate Reduction Bonds
RECsRenewable Energy Certificates
Regulatory ROEThe average cost of capital method for calculating the return on equity related to the distribution and generation business segment excluding the wholesale transmission segment
RNSRegional Network Service
ROEReturn on Equity
RRBRate Reduction Bond or Rate Reduction Certificate
RSUsRestricted share units
S&PStandard & Poor's Financial Services LLC
SBCSystems Benefits Charge
SCRCStranded Cost Recovery Charge
SERPSupplemental Executive Retirement Plans and non-qualified defined benefit retirement plans
SIPSimplified Incentive Plan
SO2
Sulfur dioxide
SSStandard service
TCAMTransmission Cost Adjustment Mechanism
TSATransmission Service Agreement
UIThe United Illuminating Company


ii



EVERSOURCE ENERGY AND SUBSIDIARIES   
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY
WESTERN MASSACHUSETTS ELECTRIC COMPANYSUBSIDIARIES

TABLE OF CONTENTS
 Page
PART I – FINANCIAL INFORMATION
   
 
   
  
 
 
 
 
   
  
 
 
 
 
   
  
 
 
 
 
   
  
 
 
 
 
   
 
   
 
 
 
   
   
   
PART II – OTHER INFORMATION
   
   
   
   
   

iii




EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars)As of September 30, 2017
As of December 31, 2016As of September 30, 2018
As of December 31, 2017

ASSETS 

  

 
Current Assets: 

  

 
Cash and Cash Equivalents$125,761

$30,251
$59,092

$38,165
Receivables, Net919,959

847,301
1,091,589

925,083
Unbilled Revenues146,634

168,490
170,044

201,361
Fuel, Materials, Supplies and Inventory305,035

328,721
192,508
 223,063
Regulatory Assets746,142

887,625
436,704

741,868
Prepayments and Other Current Assets159,939

215,284
203,434

138,009
Assets Held for Sale
 219,550
Total Current Assets2,403,470

2,477,672
2,153,371

2,487,099

Property, Plant and Equipment, Net22,537,304

21,350,510
24,967,702

23,617,463

Deferred Debits and Other Assets: 

 
 

 
Regulatory Assets3,505,901

3,638,688
4,716,631

4,497,447
Goodwill3,519,401

3,519,401
4,427,266

4,427,266
Marketable Securities570,255

544,642
585,960

585,419
Other Long-Term Assets627,289

522,260
664,739

605,692
Total Deferred Debits and Other Assets8,222,846

8,224,991
10,394,596

10,115,824

Total Assets$33,163,620

$32,053,173
$37,515,669

$36,220,386

LIABILITIES AND CAPITALIZATION 
  
 
Current Liabilities: 
  
 
Notes Payable$18,238

$1,148,500
$1,067,200

$1,088,087
Long-Term Debt – Current Portion957,697

773,883
387,310

549,631
Rate Reduction Bonds – Current Portion52,332
 
Accounts Payable794,195

884,521
962,298

1,085,034
Obligations to Third Party Suppliers149,789

122,806
199,762
 144,046
Regulatory Liabilities170,215

146,787
344,708

128,071
Other Current Liabilities530,297

562,108
616,662

594,176
Total Current Liabilities2,620,431

3,638,605
3,630,272

3,589,045

Deferred Credits and Other Liabilities: 
  
 
Accumulated Deferred Income Taxes6,001,589

5,607,207
3,386,324

3,297,518
Regulatory Liabilities700,207

702,255
3,706,792

3,637,273
Derivative Liabilities391,910

413,676
385,865

377,257
Accrued Pension and SERP946,629

1,141,514
Accrued Pension, SERP and PBOP1,013,182

1,228,091
Other Long-Term Liabilities881,056

853,260
1,094,019

1,073,501
Total Deferred Credits and Other Liabilities8,921,391

8,717,912
9,586,182

9,613,640

Capitalization: 
 
Long-Term Debt10,468,193

8,829,354
12,151,536

11,775,889
   
Rate Reduction Bonds583,331
 






   
Noncontrolling Interest – Preferred Stock of Subsidiaries155,568

155,568
155,570

155,570

Equity: 
 
Common Shareholders' Equity: 
 

 
Common Shares1,669,392

1,669,392
1,669,392

1,669,392
Capital Surplus, Paid In6,235,846

6,250,224
6,234,044

6,239,940
Retained Earnings3,474,185

3,175,171
3,882,695

3,561,084
Accumulated Other Comprehensive Loss(63,615)
(65,282)(59,582)
(66,403)
Treasury Stock(317,771)
(317,771)(317,771)
(317,771)
Common Shareholders' Equity10,998,037

10,711,734
11,408,778

11,086,242
Total Capitalization21,621,798

19,696,656

Total Liabilities and Capitalization$33,163,620

$32,053,173
$37,515,669

$36,220,386

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Thousands of Dollars, Except Share Information)2017 2016 2017 20162018 2017 2018 2017
              
Operating Revenues$1,988,512
 $2,039,706
 $5,856,458
 $5,862,525
$2,271,425
 $1,988,512
 $6,413,243
 $5,856,458
              
Operating Expenses:              
Purchased Power, Fuel and Transmission651,776
 665,810
 1,955,129
 2,001,929
842,291
 651,776
 2,442,953
 1,955,129
Operations and Maintenance300,421
 324,734
 933,400
 965,584
344,475
 307,773
 970,881
 956,274
Depreciation194,466
 181,288
 571,152
 531,781
208,671
 194,466
 612,077
 571,152
Amortization of Regulatory Assets, Net41,848
 43,942
 58,058
 56,223
Amortization92,711
 41,848
 174,108
 58,058
Energy Efficiency Programs129,205
 149,121
 391,761
 405,962
129,965
 129,205
 366,162
 391,761
Taxes Other Than Income Taxes168,193
 164,942
 479,648
 479,219
187,291
 168,193
 547,155
 479,648
Total Operating Expenses1,485,909
 1,529,837
 4,389,148
 4,440,698
1,805,404
 1,493,261
 5,113,336
 4,412,022
Operating Income502,603
 509,869
 1,467,310
 1,421,827
466,021
 495,251
 1,299,907
 1,444,436
Interest Expense108,719
 99,865
 319,477
 298,568
125,201
 108,719
 372,734
 319,477
Other Income, Net21,184
 13,641
 56,304
 23,689
16,718
 28,536
 100,656
 79,178
Income Before Income Tax Expense415,068
 423,645
 1,204,137
 1,146,948
357,538
 415,068
 1,027,829
 1,204,137
Income Tax Expense152,818
 156,446
 447,921
 428,186
66,278
 152,818
 220,497
 447,921
Net Income262,250
 267,199
 756,216
 718,762
291,260
 262,250
 807,332
 756,216
Net Income Attributable to Noncontrolling Interests1,880
 1,880
 5,639
 5,639
1,880
 1,880
 5,639
 5,639
Net Income Attributable to Common Shareholders$260,370
 $265,319
 $750,577
 $713,123
$289,380
 $260,370
 $801,693
 $750,577
              
Basic and Diluted Earnings Per Common Share$0.82
 $0.83
 $2.36
 $2.24
Basic Earnings Per Common Share$0.91
 $0.82
 $2.53
 $2.36
       
Diluted Earnings Per Common Share$0.91
 $0.82
 $2.52
 $2.36
              
Dividends Declared Per Common Share$0.48
 $0.45
 $1.43
 $1.34
$0.51
 $0.48
 $1.52
 $1.43
              
Weighted Average Common Shares Outstanding:              
Basic317,393,029
 317,787,836
 317,415,848
 317,696,823
317,360,110
 317,393,029
 317,367,252
 317,415,848
Diluted317,949,396
 318,577,079
 318,007,042
 318,511,609
317,967,311
 317,949,396
 317,948,498
 318,007,042

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Thousands of Dollars)2017 2016 2017 20162018 2017 2018 2017
              
Net Income$262,250
 $267,199
 $756,216
 $718,762
$291,260
 $262,250
 $807,332
 $756,216
Other Comprehensive (Loss)/Income, Net of Tax:       
Other Comprehensive Income/(Loss), Net of Tax:       
Qualified Cash Flow Hedging Instruments519
 534
 1,567
 1,602
432
 519
 1,627
 1,567
Changes in Unrealized (Losses)/Gains on
Marketable Securities
(1,872) 946
 733
 2,271
(136) (1,872) (724) 733
Changes in Funded Status of Pension, SERP and
PBOP Benefit Plans
673
 (1,733) (633) (2,646)1,110
 673
 5,918
 (633)
Other Comprehensive (Loss)/Income, Net of Tax(680) (253) 1,667
 1,227
Other Comprehensive Income/(Loss), Net of Tax1,406
 (680) 6,821
 1,667
Comprehensive Income Attributable to
Noncontrolling Interests
(1,880) (1,880) (5,639) (5,639)(1,880) (1,880) (5,639) (5,639)
Comprehensive Income Attributable to Common
Shareholders
$259,690
 $265,066
 $752,244
 $714,350
$290,786
 $259,690
 $808,514
 $752,244

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30,For the Nine Months Ended September 30,
(Thousands of Dollars)2017 20162018 2017

Operating Activities: 
  
 
Net Income$756,216

$718,762
$807,332

$756,216
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: 
  
 
Depreciation571,152

531,781
612,077

571,152
Deferred Income Taxes374,863

301,413
70,402

374,863
Uncollectible Expense50,720
 30,111
Pension, SERP and PBOP Expense, Net16,891

31,627
5,192

16,891
Pension and PBOP Contributions(197,900)
(121,854)(188,874)
(197,900)
Regulatory Overrecoveries, Net185,952

152,808
189,932

185,952
Amortization of Regulatory Assets, Net58,058

56,223
Amortization174,108

58,058
Other(148,741)
(27,671)(129,039)
(197,876)
Changes in Current Assets and Liabilities: 
  
 
Receivables and Unbilled Revenues, Net(107,473)
(191,454)(212,326)
(107,473)
Fuel, Materials, Supplies and Inventory23,686

25,425
44,702

23,686
Taxes Receivable/Accrued, Net88,856

347,898
70,885

88,856
Accounts Payable(96,551)
(121,513)(72,591)
(96,551)
Other Current Assets and Liabilities, Net(32,874)
(53,077)(14,858)
(30,138)
Net Cash Flows Provided by Operating Activities1,492,135

1,650,368
1,407,662

1,475,847

Investing Activities: 
  
 
Investments in Property, Plant and Equipment(1,642,280)
(1,359,171)(1,885,081)
(1,642,280)
Proceeds from Sales of Marketable Securities520,664

444,209
405,276

520,664
Purchases of Marketable Securities(506,302)
(437,197)(396,277)
(506,302)
Proceeds from the Sale of PSNH Generation Assets193,924
 
Other Investing Activities(10,177)
(9,463)(23,405)
(24,173)
Net Cash Flows Used in Investing Activities(1,638,095)
(1,361,622)(1,705,563)
(1,652,091)

Financing Activities: 
  
 
Cash Dividends on Common Shares(451,562)
(423,471)(480,082)
(451,562)
Cash Dividends on Preferred Stock(5,639)
(5,639)(5,639)
(5,639)
Decrease in Notes Payable(231,500)
(426,453)(222,110)
(231,500)
Issuance of Rate Reduction Bonds635,663
 
Issuance of Long-Term Debt1,250,000

800,000
1,300,000

1,250,000
Retirements of Long-Term Debt(320,000)
(200,000)
Retirement of Long-Term Debt(860,855)
(320,000)
Other Financing Activities171

(17,074)(20,361)
171
Net Cash Flows Provided by/(Used in) Financing Activities241,470

(272,637)
Net Increase in Cash and Cash Equivalents95,510

16,109
Cash and Cash Equivalents - Beginning of Period30,251

23,947
Cash and Cash Equivalents - End of Period$125,761

$40,056
Net Cash Flows Provided by Financing Activities346,616

241,470
Net Increase in Cash, Cash Equivalents and Restricted Cash48,715

65,226
Cash, Cash Equivalents and Restricted Cash - Beginning of Period85,890

106,750
Cash, Cash Equivalents and Restricted Cash - End of Period$134,605

$171,976

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.





THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars)As of September 30, 2017 As of December 31, 2016As of September 30, 2018 As of December 31, 2017
      
ASSETS      
Current Assets:      
Cash$9,364
 $6,579
$977
 $6,028
Receivables, Net404,065
 359,132
466,768
 370,676
Accounts Receivable from Affiliated Companies29,287
 16,851
32,074
 28,181
Unbilled Revenues48,625
 50,373
53,690
 54,154
Materials, Supplies and Inventory44,516
 52,050
45,757
 48,438
Regulatory Assets274,982
 335,526
128,793
 200,281
Prepaid Property Taxes55,375
 19,678
60,532
 17,884
Prepayments and Other Current Assets13,832
 32,992
15,470
 29,042
Total Current Assets880,046
 873,181
804,061
 754,684
      
Property, Plant and Equipment, Net8,107,957
 7,632,392
8,753,744
 8,271,030
      
Deferred Debits and Other Assets:      
Regulatory Assets1,312,191
 1,391,564
1,545,012
 1,444,935
Other Long-Term Assets145,246
 137,907
175,488
 159,597
Total Deferred Debits and Other Assets1,457,437
 1,529,471
1,720,500
 1,604,532
      
Total Assets$10,445,440
 $10,035,044
$11,278,305
 $10,630,246
      
LIABILITIES AND CAPITALIZATION      
Current Liabilities:      
Notes Payable to Eversource Parent$
 $80,100
$45,900
 $69,500
Long-Term Debt – Current Portion300,000
 250,000
250,000
 300,000
Accounts Payable292,234
 289,532
347,443
 367,605
Accounts Payable to Affiliated Companies80,899
 88,075
86,772
 82,201
Obligations to Third Party Suppliers52,865
 55,520
64,283
 52,860
Accrued Taxes64,332
 16,090
78,507
 21,665
Regulatory Liabilities69,296
 47,055
126,574
 38,967
Derivative Liabilities59,895
 77,765
Other Current Liabilities99,467
 104,309
152,147
 159,961
Total Current Liabilities1,018,988
 1,008,446
1,151,626
 1,092,759
      
Deferred Credits and Other Liabilities:      
Accumulated Deferred Income Taxes2,089,480
 1,987,661
1,136,221
 1,103,367
Regulatory Liabilities98,777
 100,138
1,131,234
 1,112,136
Derivative Liabilities391,758
 412,750
385,779
 376,918
Accrued Pension, SERP and PBOP297,492
 300,208
301,946
 354,469
Other Long-Term Liabilities134,870
 123,244
130,069
 128,135
Total Deferred Credits and Other Liabilities3,012,377
 2,924,001
3,085,249
 3,075,025
      
Capitalization:   
Long-Term Debt2,758,851
 2,516,010
3,003,625
 2,759,135
      
Preferred Stock Not Subject to Mandatory Redemption116,200
 116,200
116,200
 116,200
      
Common Stockholder's Equity:      
Common Stock60,352
 60,352
60,352
 60,352
Capital Surplus, Paid In2,110,752
 2,110,714
2,210,765
 2,110,765
Retained Earnings1,367,650
 1,299,374
1,650,182
 1,415,741
Accumulated Other Comprehensive Income/(Loss)270
 (53)
Accumulated Other Comprehensive Income306
 269
Common Stockholder's Equity3,539,024
 3,470,387
3,921,605
 3,587,127
Total Capitalization6,414,075
 6,102,597
      
Total Liabilities and Capitalization$10,445,440
 $10,035,044
$11,278,305
 $10,630,246

The accompanying notes are an integral part of these unaudited condensed financial statements.


THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Thousands of Dollars)2017 2016 2017 20162018 2017 2018 2017
              
Operating Revenues$774,762
 $760,037
 $2,173,629
 $2,175,141
$865,028
 $774,762
 $2,344,903
 $2,173,629
              
Operating Expenses:              
Purchased Power and Transmission259,005
 253,509
 711,154
 760,613
314,571
 259,005
 850,794
 711,154
Operations and Maintenance123,107
 123,034
 359,834
 356,409
128,523
 123,511
 355,500
 361,166
Depreciation63,727
 57,675
 184,275
 172,175
72,017
 63,727
 208,899
 184,275
Amortization of Regulatory Assets, Net34,574
 23,418
 58,799
 30,308
54,031
 34,574
 97,437
 58,799
Energy Efficiency Programs37,739
 44,381
 106,483
 117,969
30,240
 37,739
 71,606
 106,483
Taxes Other Than Income Taxes79,067
 81,948
 223,482
 227,981
92,987
 79,067
 267,662
 223,482
Total Operating Expenses597,219
 583,965
 1,644,027
 1,665,455
692,369
 597,623
 1,851,898
 1,645,359
Operating Income177,543
 176,072
 529,602
 509,686
172,659
 177,139
 493,005
 528,270
Interest Expense36,313
 36,083
 106,577
 108,561
37,609
 36,313
 113,107
 106,577
Other Income, Net7,509
 3,669
 14,070
 10,881
7,098
 7,913
 20,722
 15,402
Income Before Income Tax Expense148,739
 143,658
 437,095
 412,006
142,148
 148,739
 400,620
 437,095
Income Tax Expense52,595
 57,026
 159,450
 155,453
41,818
 52,595
 102,010
 159,450
Net Income$96,144
 $86,632
 $277,645
 $256,553
$100,330
 $96,144
 $298,610
 $277,645

The accompanying notes are an integral part of these unaudited condensed financial statements.


CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Thousands of Dollars)2017 2016 2017 20162018 2017 2018 2017
              
Net Income$96,144
 $86,632
 $277,645
 $256,553
$100,330
 $96,144
 $298,610
 $277,645
Other Comprehensive Income, Net of Tax:       
Other Comprehensive (Loss)/Income, Net of Tax:       
Qualified Cash Flow Hedging Instruments96
 111
 298
 333
(7) 96
 58
 298
Changes in Unrealized (Losses)/Gains on
Marketable Securities
(64) 33
 25
 78
(5) (64) (21) 25
Other Comprehensive Income, Net of Tax32
 144
 323
 411
Other Comprehensive (Loss)/Income, Net of Tax(12) 32
 37
 323
Comprehensive Income$96,176
 $86,776
 $277,968
 $256,964
$100,318
 $96,176
 $298,647
 $277,968

The accompanying notes are an integral part of these unaudited condensed financial statements.



THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30,For the Nine Months Ended September 30,
(Thousands of Dollars)2017 20162018 2017
      
Operating Activities:      
Net Income$277,645
 $256,553
$298,610
 $277,645
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:      
Depreciation184,275
 172,175
208,899
 184,275
Deferred Income Taxes90,132
 109,637
28,637
 90,132
Pension, SERP, and PBOP Expense, Net of PBOP Contributions4,546
 4,825
Regulatory Overrecoveries, Net71,413
 33,492
Uncollectible Expense12,135
 1,755
Pension, SERP, and PBOP Expense, Net6,594
 6,421
Pension Contributions(41,150) (1,875)
Regulatory (Under)/Over Recoveries, Net(1,136) 71,413
Amortization of Regulatory Assets, Net58,799
 30,308
97,437
 58,799
Other(22,113) (14,873)(55,827) (23,911)
Changes in Current Assets and Liabilities:      
Receivables and Unbilled Revenues, Net(70,936) (100,074)(126,513) (70,936)
Taxes Receivable/Accrued, Net69,335
 197,422
72,702
 69,335
Accounts Payable(1,649) (30,168)(15,303) (1,649)
Other Current Assets and Liabilities, Net(38,111) (44,908)(33,965) (36,340)
Net Cash Flows Provided by Operating Activities623,336
 614,389
451,120
 625,064
      
Investing Activities:      
Investments in Property, Plant and Equipment(621,882) (438,518)(660,673) (621,882)
Proceeds from the Sale of Property, Plant and Equipment
 9,047
Other Investing Activities185
 310
167
 185
Net Cash Flows Used in Investing Activities(621,697) (429,161)(660,506) (621,697)
      
Financing Activities:      
Cash Dividends on Common Stock(205,200) (149,700)(60,000) (205,200)
Cash Dividends on Preferred Stock(4,169) (4,169)(4,169) (4,169)
Capital Contributions from Eversource Parent
 145,700
100,000
 
Issuance of Long-Term Debt525,000
 
500,000
 525,000
Retirement of Long-Term Debt(250,000) 
(300,000) (250,000)
Decrease in Notes Payable to Eversource Parent(80,100) (168,900)(23,600) (80,100)
Premium on Issuance of Long-Term Debt21,937
 

 21,937
Other Financing Activities(6,322) (609)(7,584) (6,322)
Net Cash Flows Provided by/(Used in) Financing Activities1,146
 (177,678)
Net Increase in Cash2,785
 7,550
Cash - Beginning of Period6,579
 1,057
Cash - End of Period$9,364
 $8,607
Net Cash Flows Provided by Financing Activities204,647
 1,146
Net (Decrease)/Increase in Cash and Restricted Cash(4,739) 4,513
Cash and Restricted Cash - Beginning of Period9,619
 8,403
Cash and Restricted Cash - End of Period$4,880
 $12,916

The accompanying notes are an integral part of these unaudited condensed financial statements.






NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars)As of September 30, 2017 As of December 31, 2016As of September 30, 2018 As of December 31, 2017
      
ASSETS 
  
 
  
Current Assets:      
Cash and Cash Equivalents$89,915
 $3,494
$2,367
 $1,763
Receivables, Net322,193
 257,557
457,695
 341,341
Accounts Receivable from Affiliated Companies13,632
 8,581
43,767
 40,723
Unbilled Revenues39,160
 31,632
55,046
 49,865
Taxes Receivable
 39,738
Materials, Supplies and Inventory53,203
 62,288
66,361
 95,517
Regulatory Assets230,620
 289,400
193,541
 333,882
Prepayments and Other Current Assets16,550
 14,906
18,128
 24,499
Total Current Assets765,273
 707,596
836,905
 887,590
      
Property, Plant and Equipment, Net6,268,689
 6,051,835
8,576,096
 8,246,494
      
Deferred Debits and Other Assets:      
Regulatory Assets1,049,324
 1,057,746
1,226,811
 1,190,575
Prepaid PBOP115,367
 95,073
153,142
 126,948
Other Long-Term Assets79,653
 60,572
107,208
 84,766
Total Deferred Debits and Other Assets1,244,344
 1,213,391
1,487,161
 1,402,289
      
Total Assets$8,278,306
 $7,972,822
$10,900,162
 $10,536,373
      
LIABILITIES AND CAPITALIZATION      
Current Liabilities:      
Notes Payable$
 $126,500
$240,500
 $234,000
Long-Term Debt – Current Portion43,814
 400,000
Notes Payable to Eversource Parent16,000
 
Accounts Payable198,251
 232,599
296,208
 340,115
Accounts Payable to Affiliated Companies81,953
 91,532
77,329
 91,260
Obligations to Third Party Suppliers86,346
 55,863
133,865
 88,721
Renewable Portfolio Standards Compliance Obligations69,527
 75,571
100,782
 111,524
Accrued Taxes32,021
 3,922
Regulatory Liabilities65,520
 63,653
168,225
 79,562
Other Current Liabilities58,628
 67,200
113,728
 79,916
Total Current Liabilities636,060
 1,116,840
1,146,637
 1,025,098
      
Deferred Credits and Other Liabilities:      
Accumulated Deferred Income Taxes1,910,328
 1,836,292
1,279,302
 1,275,814
Regulatory Liabilities392,851
 391,823
1,566,285
 1,514,451
Accrued Pension and SERP39,830
 111,827
6,171
 89,995
Other Long-Term Liabilities135,613
 123,194
219,050
 198,176
Total Deferred Credits and Other Liabilities2,478,622
 2,463,136
3,070,808
 3,078,436
      
Capitalization:   
Long-Term Debt2,382,392
 1,678,116
2,944,616
 2,943,759
      
Preferred Stock Not Subject to Mandatory Redemption43,000
 43,000
43,000
 43,000
      
Common Stockholder's Equity:   ��  
Common Stock
 

 
Capital Surplus, Paid In1,047,678
 1,045,378
1,608,442
 1,502,942
Retained Earnings1,690,198
 1,625,984
2,088,157
 1,944,961
Accumulated Other Comprehensive Income356
 368
Accumulated Other Comprehensive Loss(1,498) (1,823)
Common Stockholder's Equity2,738,232
 2,671,730
3,695,101
 3,446,080
Total Capitalization5,163,624
 4,392,846
      
Total Liabilities and Capitalization$8,278,306

$7,972,822
$10,900,162

$10,536,373

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Thousands of Dollars)2017 2016 2017 20162018 2017 2018 2017
              
Operating Revenues$725,701
 $780,462
 $1,913,548
 $1,985,979
$939,460
 $851,922
 $2,400,324
 $2,290,432
              
Operating Expenses: 
  
  
  
 
  
  
  
Purchased Power and Transmission259,400
 291,382
 689,784
 764,907
383,208
 294,115
 981,895
 799,007
Operations and Maintenance92,571
 96,282
 266,203
 279,932
123,634
 118,777
 344,478
 346,469
Depreciation56,200
 54,695
 167,598
 159,151
70,616
 68,746
 205,210
 204,442
Amortization of Regulatory Assets, Net9,845
 9,621
 17,806
 18,275
17,149
 10,131
 35,467
 17,243
Energy Efficiency Programs71,615
 84,717
 198,803
 212,882
89,430
 82,611
 229,408
 228,543
Taxes Other Than Income Taxes37,052
 35,050
 99,090
 101,800
49,927
 47,830
 145,740
 130,492
Total Operating Expenses526,683
 571,747
 1,439,284
 1,536,947
733,964
 622,210
 1,942,198
 1,726,196
Operating Income199,018
 208,715
 474,264
 449,032
205,496
 229,712
 458,126
 564,236
Interest Expense24,488
 21,101
 69,962
 62,206
26,958
 30,810
 80,780
 88,715
Other Income, Net3,426
 5,022
 8,703
 7,524
13,697
 9,165
 40,567
 24,610
Income Before Income Tax Expense177,956
 192,636
 413,005
 394,350
192,235
 208,067
 417,913
 500,131
Income Tax Expense69,796
 75,440
 161,320
 154,493
51,640
 82,301
 112,247
 196,001
Net Income$108,160
 $117,196
 $251,685
 $239,857
$140,595
 $125,766
 $305,666
 $304,130

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Thousands of Dollars)2017 2016 2017 20162018 2017 2018 2017
              
Net Income$108,160
 $117,196
 $251,685
 $239,857
$140,595
 $125,766
 $305,666
 $304,130
Other Comprehensive Loss, Net of Tax:       
Other Comprehensive Income, Net of Tax:       
Changes in Funded Status of SERP Benefit Plan(4) (10) (12) (31)1
 (4) 3
 (12)
Other Comprehensive Loss, Net of Tax(4) (10) (12) (31)
Qualified Cash Flow Hedging Instruments110
 109
 328
 328
Changes in Unrealized (Losses)/Gains on
Marketable Securities
(1) (18) (6) 7
Other Comprehensive Income, Net of Tax110
 87
 325
 323
Comprehensive Income$108,156
 $117,186
 $251,673
 $239,826
$140,705
 $125,853
 $305,991
 $304,453

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30,For the Nine Months Ended September 30,
(Thousands of Dollars)2017 20162018 2017
      
Operating Activities: 
  
 
  
Net Income$251,685
 $239,857
$305,666
 $304,130
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: 
  
 
  
Depreciation167,598
 159,151
205,210
 204,442
Deferred Income Taxes71,327
 40,960
16,203
 100,335
Pension, SERP and PBOP (Benefits)/Expense, Net(7,305) 1,370
Uncollectible Expense20,433
 14,937
Pension, SERP and PBOP Income, Net(15,855) (7,586)
Pension and PBOP Contributions(83,040) (26,734)(60,454) (83,040)
Regulatory Overrecoveries, Net61,356
 131,774
180,797
 71,647
Amortization of Regulatory Assets, Net17,806
 18,275
35,467
 17,243
Other(23,120) (20,088)(49,178) (47,972)
Changes in Current Assets and Liabilities: 
  
 
  
Receivables and Unbilled Revenues, Net(95,398) (103,444)(155,669) (113,960)
Materials, Supplies and Inventory9,086
 30,659
29,156
 11,483
Taxes Receivable/Accrued, Net67,501
 141,379
42,148
 71,705
Accounts Payable(38,486) (22,913)(13,178) (42,519)
Other Current Assets and Liabilities, Net13,961
 (25,942)33,543
 4,982
Net Cash Flows Provided by Operating Activities412,971
 564,304
574,289
 505,827
      
Investing Activities: 
  
 
  
Investments in Property, Plant and Equipment(358,041) (327,731)(538,973) (467,275)
Other Investing Activities(3,617) 
46
 (3,565)
Net Cash Flows Used in Investing Activities(361,658) (327,731)(538,927) (470,840)
      
Financing Activities: 
  
 
  
Cash Dividends on Common Stock(186,000) (278,300)(161,000) (214,500)
Cash Dividends on Preferred Stock(1,470) (1,470)(1,470) (1,470)
Capital Contributions from Eversource Parent2,300
 25,000
105,500
 2,300
Decrease in Notes Payable(126,500) (26,500)
Increase in Notes Payable to Eversource Parent16,000
 
Increase/(Decrease) in Notes Payable6,500
 (80,600)
Issuance of Long-Term Debt350,000
 250,000

 350,000
Retirements of Long-Term Debt
 (200,000)
Other Financing Activities(3,222) (2,495)(239) (3,410)
Net Cash Flows Provided by/(Used in) Financing Activities35,108
 (233,765)
Increase in Cash and Cash Equivalents86,421
 2,808
Cash and Cash Equivalents - Beginning of Period3,494
 3,346
Cash and Cash Equivalents - End of Period$89,915
 $6,154
Net Cash Flows (Used in)/Provided by Financing Activities(34,709) 52,320
Increase in Cash, Cash Equivalents and Restricted Cash653
 87,307
Cash, Cash Equivalents and Restricted Cash - Beginning of Period14,708
 15,506
Cash, Cash Equivalents and Restricted Cash - End of Period$15,361
 $102,813

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARYSUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars)As of September 30, 2017 As of December 31, 2016As of September 30, 2018 As of December 31, 2017
      
ASSETS      
Current Assets:      
Cash$597
 $4,646
$7,462
 $900
Receivables, Net93,299
 84,450
115,706
 92,774
Accounts Receivable from Affiliated Companies24,331
 4,185
20,007
 5,297
Unbilled Revenues37,133
 41,004
39,760
 49,448
Fuel, Materials, Supplies and Inventory158,091
 162,354
Materials, Supplies and Inventory39,877
 40,285
Regulatory Assets112,465
 117,240
61,379
 130,134
Special Deposits26,863
 728
Prepayments and Other Current Assets3,797
 28,908
7,600
 28,203
Assets Held for Sale
 219,550
Total Current Assets429,713
 442,787
318,654
 567,319
      
Property, Plant and Equipment, Net3,167,905
 3,039,313
2,826,541
 2,642,274
      
Deferred Debits and Other Assets:      
Regulatory Assets244,561
 245,525
892,075
 810,677
Other Long-Term Assets51,740
 37,720
19,252
 42,391
Total Deferred Debits and Other Assets296,301
 283,245
911,327
 853,068
      
Total Assets$3,893,919
 $3,765,345
$4,056,522
 $4,062,661
      
LIABILITIES AND CAPITALIZATION      
Current Liabilities:      
Notes Payable to Eversource Parent$202,300
 $160,900
$46,600
 $262,900
Long-Term Debt – Current Portion110,000
 70,000

 110,000
Rate Reduction Bonds – Current Portion52,332
 
Accounts Payable92,201
 85,716
118,523
 128,685
Accounts Payable to Affiliated Companies42,788
 29,154
35,699
 24,676
Dividends Payable to Eversource Parent
 150,000
Accrued Interest19,615
 6,722
Renewable Portfolio Standards Compliance Obligations29,867
 27,765
Regulatory Liabilities7,923
 12,659
39,661
 6,251
Other Current Liabilities61,210
 43,253
34,790
 33,437
Total Current Liabilities516,422
 401,682
377,087
 750,436
      
Deferred Credits and Other Liabilities:      
Accumulated Deferred Income Taxes827,412
 785,385
457,512
 443,468
Regulatory Liabilities40,822
 44,779
433,822
 444,397
Accrued Pension, SERP and PBOP98,553
 94,652
126,839
 124,639
Other Long-Term Liabilities54,131
 49,442
35,901
 56,689
Total Deferred Credits and Other Liabilities1,020,918
 974,258
1,054,074
 1,069,193
      
Capitalization:   
Long-Term Debt892,581
 1,002,048
894,100
 892,438
   
Rate Reduction Bonds583,331
 
      
Common Stockholder's Equity:      
Common Stock
 

 
Capital Surplus, Paid In843,134
 843,134
538,134
 843,134
Retained Earnings625,012
 549,286
612,919
 511,382
Accumulated Other Comprehensive Loss(4,148) (5,063)(3,123) (3,922)
Common Stockholder's Equity1,463,998
 1,387,357
1,147,930
 1,350,594
Total Capitalization2,356,579
 2,389,405
      
Total Liabilities and Capitalization$3,893,919
 $3,765,345
$4,056,522
 $4,062,661

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARYSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Thousands of Dollars)2017 2016 2017 20162018 2017 2018 2017
              
Operating Revenues$250,032
 $266,946
 $733,572
 $727,753
$290,203
 $250,032
 $792,700
 $733,572
              
Operating Expenses:              
Purchased Power, Fuel and Transmission57,099
 59,833
 179,289
 155,700
100,763
 57,099
 293,975
 179,289
Operations and Maintenance63,669
 64,183
 191,153
 187,184
55,429
 65,104
 153,296
 195,637
Depreciation32,084
 29,646
 95,266
 86,524
23,223
 32,084
 69,524
 95,266
Amortization of Regulatory Assets/(Liabilities), Net2,835
 14,158
 (10,658) 14,490
27,357
 2,835
 41,318
 (10,658)
Energy Efficiency Programs4,007
 3,983
 11,040
 10,862
5,863
 4,007
 15,694
 11,040
Taxes Other Than Income Taxes22,936
 20,460
 66,935
 64,543
21,095
 22,936
 59,775
 66,935
Total Operating Expenses182,630
 192,263
 533,025
 519,303
233,730
 184,065
 633,582
 537,509
Operating Income67,402
 74,683
 200,547
 208,450
56,473
 65,967
 159,118
 196,063
Interest Expense12,896
 12,397
 38,676
 37,386
16,593
 12,896
 43,977
 38,676
Other Income, Net1,229
 574
 2,883
 1,007
16,095
 2,664
 24,253
 7,367
Income Before Income Tax Expense55,735
 62,860
 164,754
 172,071
55,975
 55,735
 139,394
 164,754
Income Tax Expense22,012
 24,345
 65,128
 66,242
15,309
 22,012
 37,857
 65,128
Net Income$33,723
 $38,515
 $99,626
 $105,829
$40,666
 $33,723
 $101,537
 $99,626

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Thousands of Dollars)2017 2016 2017 20162018 2017 2018 2017
              
Net Income$33,723
 $38,515
 $99,626
 $105,829
$40,666
 $33,723
 $101,537
 $99,626
Other Comprehensive Income, Net of Tax:              
Qualified Cash Flow Hedging Instruments291
 290
 872
 871
268
 291
 835
 872
Changes in Unrealized (Losses)/Gains on
Marketable Securities
(112) 56
 43
 135
(7) (112) (36) 43
Other Comprehensive Income, Net of Tax179
 346
 915
 1,006
261
 179
 799
 915
Comprehensive Income$33,902
 $38,861
 $100,541
 $106,835
$40,927
 $33,902
 $102,336
 $100,541

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARYSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30,For the Nine Months Ended September 30,
(Thousands of Dollars)2017 20162018 2017
      
Operating Activities:      
Net Income$99,626
 $105,829
$101,537
 $99,626
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:      
Depreciation95,266
 86,524
69,524
 95,266
Deferred Income Taxes43,217
 74,522
11,473
 43,217
Regulatory Over/(Under) Recoveries, Net8,910
 (4,289)
Amortization of Regulatory (Liabilities)/Assets, Net(10,658) 14,490
Regulatory (Under)/Over Recoveries, Net(19,764) 8,910
Amortization of Regulatory Assets/(Liabilities), Net41,318
 (10,658)
Other(7,792) (12,660)(3,104) (7,866)
Changes in Current Assets and Liabilities:      
Receivables and Unbilled Revenues, Net(30,276) (28,754)(32,819) (30,276)
Fuel, Materials, Supplies and Inventory4,263
 (4,014)14,555
 4,263
Taxes Receivable/Accrued, Net10,749
 33,589
10,929
 10,749
Accounts Payable18,394
 14,508
(3,828) 18,394
Other Current Assets and Liabilities, Net32,296
 26,207
27,844
 32,300
Net Cash Flows Provided by Operating Activities263,995
 305,952
217,665
 263,925
      
Investing Activities:      
Investments in Property, Plant and Equipment(215,470) (215,804)(236,206) (215,470)
Proceeds from the Sale of Generation Assets193,924
 
Proceeds from the Sale of Property4,782
 
Other Investing Activities113
 272
367
 113
Net Cash Flows Used in Investing Activities(215,357) (215,532)(37,133) (215,357)
      
Financing Activities:      
Cash Dividends on Common Stock(23,900) (58,200)(150,000) (23,900)
Capital Contributions from Eversource Parent
 94,500
Retirements of Long-Term Debt(70,000) 
Increase/(Decrease) in Notes Payable to Eversource Parent41,400
 (123,800)
Capital Contribution from Eversource Parent225,000
 
Return of Capital(530,000) 
Issuance of Rate Reduction Bonds635,663
 
Retirement of Long-Term Debt(110,000) (70,000)
(Decrease)/Increase in Notes Payable to Eversource Parent(216,300) 41,400
Other Financing Activities(187) (217)1,080
 (187)
Net Cash Flows Used in Financing Activities(52,687) (87,717)(144,557) (52,687)
Net (Decrease)/Increase in Cash(4,049) 2,703
Cash - Beginning of Period4,646
 1,733
Cash - End of Period$597
 $4,436
Net Increase/(Decrease) in Cash and Restricted Cash35,975
 (4,119)
Cash and Restricted Cash - Beginning of Period2,191
 5,953
Cash and Restricted Cash - End of Period$38,166
 $1,834

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




WESTERN MASSACHUSETTS ELECTRIC COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars)As of September 30, 2017 As of December 31, 2016
    
ASSETS   
Current Assets:   
Receivables, Net$58,034
 $54,940
Accounts Receivable from Affiliated Companies23,440
 14,425
Unbilled Revenues15,000
 15,329
Materials, Supplies and Inventory6,221
 8,618
Regulatory Assets60,606
 64,123
Prepayments and Other Current Assets1,297
 2,595
Total Current Assets164,598
 160,030
    
Property, Plant and Equipment, Net1,769,566
 1,678,262
    
Deferred Debits and Other Assets:   
Regulatory Assets121,796
 127,291
Other Long-Term Assets38,934
 29,062
Total Deferred Debits and Other Assets160,730
 156,353
    
Total Assets$2,094,894
 $1,994,645
    
LIABILITIES AND CAPITALIZATION   
Current Liabilities:   
Notes Payable to Eversource Parent$96,900
 $51,000
Accounts Payable58,518
 56,036
Accounts Payable to Affiliated Companies22,181
 19,478
Obligations to Third Party Suppliers9,736
 10,508
Renewable Portfolio Standards Compliance Obligations16,144
 20,383
Regulatory Liabilities10,236
 14,888
Other Current Liabilities13,020
 14,984
Total Current Liabilities226,735
 187,277
    
Deferred Credits and Other Liabilities: 
  
Accumulated Deferred Income Taxes519,998
 490,793
Regulatory Liabilities22,726
 17,227
Accrued Pension, SERP and PBOP18,038
 20,390
Other Long-Term Liabilities45,831
 41,308
Total Deferred Credits and Other Liabilities606,593
 569,718
    
Capitalization: 
  
Long-Term Debt566,172
 566,536
    
Common Stockholder's Equity: 
  
Common Stock10,866
 10,866
Capital Surplus, Paid In444,398
 444,398
Retained Earnings242,157
 218,212
Accumulated Other Comprehensive Loss(2,027) (2,362)
Common Stockholder's Equity695,394
 671,114
Total Capitalization1,261,566
 1,237,650
    
Total Liabilities and Capitalization$2,094,894
 $1,994,645

The accompanying notes are an integral part of these unaudited condensed financial statements.   



WESTERN MASSACHUSETTS ELECTRIC COMPANY
CONDENSED STATEMENTS OF INCOME
(Unaudited)
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Thousands of Dollars)2017 2016 2017 2016
        
Operating Revenues$126,335
 $124,042
 $377,214
 $368,533
        
Operating Expenses:       
Purchased Power and Transmission34,828
 32,178
 109,553
 104,406
Operations and Maintenance21,528
 24,125
 65,769
 68,018
Depreciation12,546
 11,567
 36,844
 34,414
Amortization of Regulatory Assets/(Liabilities), Net286
 1,102
 (563) 3,305
Energy Efficiency Programs10,996
 12,389
 29,739
 33,593
Taxes Other Than Income Taxes10,779
 10,609
 31,403
 30,440
Total Operating Expenses90,963
 91,970
 272,745
 274,176
Operating Income35,372
 32,072
 104,469
 94,357
Interest Expense6,321
 6,222
 18,752
 18,298
Other Income, Net1,060
 179
 1,409
 133
Income Before Income Tax Expense30,111
 26,029
 87,126
 76,192
Income Tax Expense12,504
 10,018
 34,680
 30,089
Net Income$17,607
 $16,011
 $52,446
 $46,103

The accompanying notes are an integral part of these unaudited condensed financial statements.       


CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Thousands of Dollars)2017 2016 2017 2016
        
Net Income$17,607
 $16,011
 $52,446
 $46,103
Other Comprehensive Income, Net of Tax: 
    
  
Qualified Cash Flow Hedging Instruments109
 109
 328
 328
Changes in Unrealized (Losses)/Gains on
  Marketable Securities
(18) 9
 7
 22
Other Comprehensive Income, Net of Tax91
 118
 335
 350
Comprehensive Income$17,698
 $16,129
 $52,781
 $46,453

The accompanying notes are an integral part of these unaudited condensed financial statements.       


WESTERN MASSACHUSETTS ELECTRIC COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the Nine Months Ended September 30,
(Thousands of Dollars)2017 2016
    
Operating Activities:   
Net Income$52,446
 $46,103
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:   
Depreciation36,844
 34,414
Deferred Income Taxes29,008
 15,587
Regulatory Overrecoveries, Net10,291
 323
Amortization of Regulatory (Liabilities)/Assets, Net(563) 3,305
Other(10,182) (2,532)
Changes in Current Assets and Liabilities:   
Receivables and Unbilled Revenues, Net(16,818) 1,933
Taxes Receivable/Accrued, Net4,203
 36,658
Accounts Payable(5,777) (16,240)
Other Current Assets and Liabilities, Net(7,482) 5,277
Net Cash Flows Provided by Operating Activities91,970
 124,828
    
Investing Activities:   
Investments in Property, Plant and Equipment(109,233) (104,811)
Proceeds from Sales of Marketable Securities1,641
 1,934
Purchases of Marketable Securities(1,590) (1,894)
Net Cash Flows Used in Investing Activities(109,182) (104,771)
    
Financing Activities:   
Cash Dividends on Common Stock(28,500) (28,500)
Capital Contributions from Eversource Parent
 53,000
Increase/(Decrease) in Notes Payable to Eversource Parent45,900
 (95,200)
Issuance of Long-Term Debt
 50,000
Other Financing Activities(188) (191)
Net Cash Flows Provided by/(Used in) Financing Activities17,212
 (20,891)
Net Decrease in Cash
 (834)
Cash - Beginning of Period
 834
Cash - End of Period$
 $

The accompanying notes are an integral part of these unaudited condensed financial statements.



EVERSOURCE ENERGY AND SUBSIDIARIES
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY
WESTERN MASSACHUSETTS ELECTRIC COMPANYSUBSIDIARIES

COMBINED NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)

Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout the combined notes to the unaudited condensed financial statements.

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.    Basis of Presentation
Eversource Energy is a public utility holding company primarily engaged, through its wholly-owned regulated utility subsidiaries, in the energy delivery business.  Eversource Energy's wholly-owned regulated utility subsidiaries consist of CL&P, NSTAR Electric and PSNH WMECO,(electric utilities), Yankee Gas and NSTAR Gas.Gas (natural gas utilities) and Aquarion (water utilities).  Eversource provides energy delivery and/or water service to approximately 3.7four million electric, and natural gas and water customers through these sixeight regulated utilities in Connecticut, Massachusetts and New Hampshire.

On June 2,December 31, 2017, Eversource announced that it had enteredWestern Massachusetts Electric Company ("WMECO") was merged into an agreement to acquire Aquarion from Macquarie Infrastructure PartnersNSTAR Electric. In accordance with accounting guidance on combinations between entities under common control, the net assets, results of operations and cash flows of WMECO are reflected in the NSTAR Electric financial statements. NSTAR Electric's financial statements for $1.675 billion, consisting of approximately $880 millionall prior periods presented in cash and $795 million of assumed Aquarion debt. The transaction requires approval from PURA,this combined Quarterly Report on Form 10-Q have been retrospectively recast as if the DPU,merger occurred on the NHPUC, the Maine PUC, and the Federal Communications Commission, and is also subject to a review under the Hart-Scott-Rodino Act. On June 29, 2017, Eversource and Aquarion filed joint applications with regulatory agencies in Connecticut, Massachusetts, New Hampshire and Maine requesting approvalfirst day of the transaction. With the exception of Massachusetts, all state and federal regulatory agency approvals have been received and the related review period has expired. The transaction is expected to close by December 31, 2017.earliest reporting period.  

The unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH include the accounts of each of their respective subsidiaries.  Intercompany transactions have been eliminated in consolidation.  The accompanying unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P and WMECO are herein collectively referred to as the "financial statements."

The combined notes to the financial statements have been prepared pursuant to the rules and regulations of the SEC.  Certain information and footnote disclosures included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations.  The accompanying financial statements should be read in conjunction with the Combined Notes to Financial Statements included in Item 8, "Financial Statements and Supplementary Data," of the Eversource 20162017 Form 10-K, which was filed with the SEC.SEC on February 26, 2018. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

The financial statements contain, in the opinion of management, all adjustments (including normal, recurring adjustments) necessary to present fairly Eversource's, CL&P's, NSTAR Electric's PSNH's and WMECO'sPSNH's financial position as of September 30, 20172018 and December 31, 2016,2017, the results of operations and comprehensive income for the three and nine months ended September 30, 20172018 and 2016,2017, and the cash flows for the nine months ended September 30, 20172018 and 2016.2017.  The results of operations and comprehensive income for the three and nine months ended September 30, 20172018 and 20162017 and the cash flows for the nine months ended September 30, 20172018 and 20162017 are not necessarily indicative of the results expected for a full year.  

Eversource consolidates CYAPC and YAEC because CL&P's, NSTAR Electric's PSNH's and WMECO'sPSNH's combined ownership interest in each of these entities is greater than 50 percent.  Intercompany transactions between CL&P, NSTAR Electric, PSNH and WMECO and the CYAPC and YAEC companies have been eliminated in consolidation of the Eversource financial statements.

Eversource's utility subsidiaries' electric and natural gas distribution (including generation assets) and transmission businesses, and water distribution business, are subject to rate-regulation that is based on cost recovery and meets the criteria for application of accounting guidance for entities with rate-regulated operations, which considers the effect of regulation on the differences in the timing of the recognition of certain revenues and expenses from those of other businesses and industries. See Note 2, "Regulatory Accounting," for further information.

Certain reclassifications of prior period data were made in the accompanying financial statements to conform to the current period presentation.


B.    Accounting Standards
Accounting Standards Issued but Not Yet Effective: In May 2014,February 2016, the Financial Accounting Standards Board ("FASB")FASB issued an Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which amends existing revenue recognition guidance and is required to be applied retrospectively (either to each reporting period presented or cumulatively at the date of initial application).  The Company will implement the standard in the first quarter of 2018 cumulatively at the date of initial application. Implementation of the ASU is not expected to have a material effect on the financial statements of Eversource, CL&P, NSTAR Electric, PSNH or WMECO.


In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities, which is required to be implemented in the first quarter of 2018.  The ASU will remove the available-for-sale designation for equity securities, whereby changes in fair value are recorded in accumulated other comprehensive income within shareholders' equity, and will require changes in fair value of all equity securities to be recorded in earnings beginning on January 1, 2018, with the unrealized gain or loss on available-for-sale equity securities as of that date reclassified to retained earnings as a cumulative effect of adoption.  The fair value of available-for-sale equity securities subject to this guidance as of September 30, 2017 was approximately $51 million with an unrealized gain of $1.7 million.  The remaining available-for-sale equity securities included in marketable securities on the balance sheet are held in nuclear decommissioning trusts and are subject to regulatory accounting treatment and will not be impacted by this guidance. Implementation of the ASU for other financial instruments is not expected to have a material impact on the financial statements of Eversource, CL&P, NSTAR Electric, PSNH or WMECO.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which changes existing lease accounting guidance and is required to be applied in the first quarter of 2019, with earlier application permitted.  In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) - Targeted Improvements, allowing a transition method to adopt the new leases standard as of the adoption date and recognizing a cumulative-effect to the opening balance of retained earnings in the period of adoption, with comparative periods presented in the financial statements continuing to follow existing lease accounting guidance under Topic 840 (Leases) in the accounting literature. The Company intends to adopt the transition method allowed in ASU 2018-11. The Company will implement the new leases standard in the first quarter of 2019 and apply the Topic 842 lease criteria are required to be applied tonew leases and lease renewals entered into effective on or after January 1, 2019, and leases entered into before that date are required to be recognized and measured using a modified retrospective approach.2019.  The Company is reviewing the requirements of ASU 2016-02, includingthe new leases standard include balance sheet recognition of leases previously deemed to be operating leases, and expects to implementadditional disclosure requirements.  The Company is in the process of evaluating what impact the ASU, inincluding the first quarterpractical expedients, will have on its financial statements, including reviewing its lease population. The Company has decided to elect the practical expedient package whereby it need not reassess whether a contract is or contains a lease or whether a lease is an operating or capital lease and it need not reassess initial direct costs for leases. As of 2019.December 31, 2017, Eversource’s total future undiscounted minimum rental payments, excluding executory costs, under long-term noncancelable operating and capital leases were less than $100 million.

In March 2017,Accounting Standards Recently Adopted: On January 1, 2018, Eversource, CL&P, NSTAR Electric and PSNH adopted ASU 2014-09, Revenue from Contracts with Customers, which amended existing revenue recognition guidance, using the FASB issuedmodified retrospective method (cumulatively at the date of initial application) applying it only to contracts that were not complete at January 1, 2018. Under this method of adoption, prior year reported results were not restated. Implementation of the ASU did not have a material effect on the results of operations, financial position or cash flows of Eversource, CL&P, NSTAR Electric or PSNH. See Note 16, "Revenues,"for further information.

The Company identified an item that was accounted for differently under the new revenue guidance, as compared to the previously existing guidance. As a result of applying guidance on the unit of account under the new standard, purchases of power from and sales of power to ISO-New England are now accounted for net by the hour, rather than net by the month. This change increased Operating Revenues and Purchased Power, Fuel and Transmission by $0.4 million and $22.4 million, respectively, for the three and nine months ended September 30, 2018, with no impact on net income.

On January 1, 2018, Eversource adopted ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities.  The ASU removed the available-for-sale designation for equity securities, whereby changes in fair value were previously recorded in accumulated other comprehensive income within shareholders' equity, and required changes in fair value of all equity securities to be recorded in earnings effective January 1, 2018. There was no cumulative effect of adoption. Unrealized gains recorded in Other Income, Net were $2.4 million and $2.6 million for the three and nine months ended September 30, 2018, respectively. For further information, see Note 5, "Marketable Securities," to the financial statements.  

On January 1, 2018, Eversource, CL&P, NSTAR Electric and PSNH adopted ASU 2017-07, Compensation – Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, required to be implemented in the first quarter of 2018.. The ASU requiresrequired separate presentation of service cost from other components of net pension, SERP and PBOP costs, with the other components presented as non-operating income and not subject to capitalization. The ASU is required to behas been applied retrospectively for the separate presentation in the income statement of service costs and other components and prospectively in the balance sheet for the capitalization of only the service cost component. The implementationAs of September 30, 2018, the ASU willnon-service cost components of net pension, SERP and PBOP costs that were not havecapitalized in plant were recorded as an impactincrease to regulatory liabilities of approximately $30 million, as these amounts continue to be included in rates. See Note 1G, "Summary of Significant Accounting Policies - Other Income, Net," to the financial statements for the portion of pension, SERP and PBOP costs that are presented as non-operating income for the three and nine months ended September 30, 2018 and 2017. For the three months ended September 30, 2017, the amounts, which were previously presented within Operations and Maintenance expense on the netstatements of income, oftotaled $7.3 million at Eversource, $0.4 million at CL&P, $4.7 million at NSTAR Electric and $1.5 million at PSNH, and have been retrospectively presented within Other Income, Net. For the nine months ended September 30, 2017, these amounts were $22.9 million at Eversource, $1.3 million at CL&P, $14.5 million at NSTAR Electric and $4.5 million at PSNH.

On January 1, 2018, Eversource, CL&P, NSTAR Electric and PSNH adopted two accounting standards relating to the statement of cash flows; ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, and ASU 2016-18, Restricted Cash. As a result of implementing ASU 2016-15, dividends from equity method investments of $16.4 million and $14.0 million for the nine months ended September 30, 2018 and 2017, respectively, are presented in operating activities at Eversource, for which the 2017 amounts were previously classified in investing activities. ASU 2016-18 required that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. Both standards were applied retrospectively, as required, and neither had a material impact on Eversource's, CL&P's, NSTAR Electric's or WMECO.PSNH's statements of cash flows. See Note 1I, "Summary of Significant Accounting Policies - Supplemental Cash Flow Information," to the financial statements for a reconciliation of cash and cash equivalents as reported on the balance sheet to the statement of cash flows, which includes amounts described as restricted cash and restricted cash equivalents.



C.    Northern Pass
Northern Pass is Eversource's planned 1,090 MW HVDC transmission line that will interconnect from the Québec-New Hampshire border to Franklin, New Hampshire and an associated alternating current radial transmission line between Franklin and Deerfield, New Hampshire.  As of September 30, 2018, our capitalized Northern Pass project costs were approximately $302 million.

In March 2018, the New Hampshire Site Evaluation Committee ("NHSEC") issued a written decision denying Northern Pass’ siting application and the Massachusetts EDCs terminated the selection of, and subsequent contract negotiations with, Northern Pass under the Massachusetts Clean Energy RFP. On April 27, 2018, NPT filed a motion for rehearing with the NHSEC and on July 12, 2018, the NHSEC issued its written decision denying Northern Pass’ motion for rehearing. On August 10, 2018, NPT filed an appeal to the New Hampshire Supreme Court, based on the NHSEC’s failure to follow applicable law in its review of the project. On October 12, 2018, the New Hampshire Supreme Court accepted this appeal and directed the NHSEC to transmit the record of its proceedings to the Court by December 11, 2018. The Supreme Court has not yet issued a schedule for the balance of the appeal process. In parallel, NPT intends to continue to pursue all available options to secure NHSEC approval and to construct the project.

The March 2018 NHSEC denial of Northern Pass' siting application caused us to review the recoverability of our Northern Pass project costs in the first quarter of 2018. In this recoverability review, we estimated undiscounted expected project cash flows and compared the result to our estimated project costs to determine whether the recorded amount was recoverable. Our undiscounted cash flows were substantially in excess of our estimated project costs. We completed this analysis and concluded that our project costs were recoverable as of March 31, 2018, based on our expectation that the Northern Pass project remains probable of being placed in service. The events that occurred subsequent to March 31, 2018 did not require an additional review of the recoverability of the Northern Pass project costs as of September 30, 2018.

Consistent with Eversource’s and HQ’s long-term relationship to bring clean energy into New England, Eversource and HQ remain committed to Northern Pass and the many benefits this project will bring to our customers and the region.  If as a result of future events and changes in circumstances a new recoverability review were to conclude that our project costs are not recoverable, then we would reduce Northern Pass' project costs to the estimated fair value, which could result in most of our $302 million of capitalized project costs being impaired. Such an impairment could have a material adverse effect on our financial position and results of operations.

D.     Impairment of Access Northeast
Access Northeast is a natural gas pipeline and storage project being developed jointly by Eversource, Enbridge, Inc. ("Enbridge") and National Grid plc ("National Grid"), through Algonquin Gas Transmission, LLC ("AGT"). Eversource's investments include a 40 percent ownership interest in Access Northeast, which is accounted for as an equity method investment. Equity method investments are assessed for impairment when conditions exist that indicate that the fair value of the investment is less than book value.  If the decline in value is considered to be other-than-temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.  Impairment evaluations involve a significant degree of judgment and estimation, including identifying circumstances that indicate an impairment may exist and developing undiscounted future cash flows.

In 2015 and 2016, AGT sought to secure long-term natural gas pipeline capacity contracts with EDCs in Massachusetts, Connecticut, New Hampshire, Maine, and Rhode Island. Subsequently, in 2016, the Massachusetts Supreme Judicial Court and the NHPUC each ruled that state statutes precluded the state regulatory agencies from approving those contracts in Massachusetts and New Hampshire, respectively. The New Hampshire Supreme Court overruled the NHPUC decision in May 2018. Legislative changes are needed in Massachusetts to allow the DPU to approve natural gas pipeline capacity contracts. No such changes have occurred during any legislative session in 2017 or 2018.

In September 2018, certain non-Eversource natural gas related events in eastern Massachusetts resulted in widespread property and system damage, personal injuries, and a fatality. As a result of these events, compounded by the failure to secure Massachusetts legislation to date, we believe there is significant uncertainty around the future timing of, and ability to secure, needed legislative change affecting the natural gas industry and pipeline expansion, which may significantly delay the completion of the Access Northeast project.

Eversource identified the September 2018 natural gas related event, compounded by the adverse legislative environment, as negative evidence that indicated potential impairment. Our impairment assessment uses a discounted cash flow income approach, including consideration of the severity and duration of any decline in fair value of our investment in the project, and involves significant management judgment and estimation, including projections of the project’s discounted cash flows and assumptions about exit price. As of September 30, 2018, management determined that the future cash flows of the Access Northeast project are uncertain and can no longer be reasonably estimated and that the book value of our equity method investment is not recoverable. As a result, for the three months ended September 30, 2018, Eversource recorded an other-than-temporary impairment of $32.9 million within Other Income, Net on our statement of income, representing the full carrying value of our equity method investment.

E.    Provision for Uncollectible Accounts
Eversource, including CL&P, NSTAR Electric PSNH and WMECO,PSNH, presents its receivables at estimated net realizable value by maintaining a provision for uncollectible accounts.  This provision is determined based upon a variety of judgments and factors, including the application of an estimated uncollectible percentage to each receivable aging category.  The estimate is based upon historical collection and write-off experience and management's assessment of collectability from customers.  Management continuously assesses the collectability of receivables and adjusts collectability estimates based on actual experience.  Receivable balances are written off against the provision for uncollectible accounts when the customer accounts are terminated and these balances are deemed to be uncollectible.



The PURA allows CL&P and Yankee Gas to accelerate the recovery of accounts receivable balances attributable to qualified customers under financial or medical duress (uncollectible hardship accounts receivable) outstanding for greater than 180 days and 90 days, respectively.  The DPU allows WMECONSTAR Electric and NSTAR Gas also to recover in rates, amounts associated with certain uncollectible hardship accounts receivable. Certain of NSTAR Electric'sThese uncollectible hardship accounts receivable are expected to be recovered in future rates, similar to WMECO and NSTAR Gas. These uncollectible customer account balances are included in Regulatory Assets or Other Long-Term Assets on the balance sheets.

The total provision for both uncollectible accounts and for uncollectible hardship accounts which(the uncollectible hardship balance is included in the total provision,provision) is included in Receivables, Net on the balance sheets, and wasis as follows:
Total Provision for Uncollectible Accounts Uncollectible HardshipTotal Provision for Uncollectible Accounts Uncollectible Hardship
(Millions of Dollars)As of September 30, 2017 As of December 31, 2016 As of September 30, 2017 As of December 31, 2016As of September 30, 2018 As of December 31, 2017 As of September 30, 2018 As of December 31, 2017
Eversource$196.8
 $200.6
 $126.3
 $119.9
$218.1
 $195.7
 $132.6
 $122.5
CL&P77.6
 86.4
 64.6
 67.7
84.6
 78.9
 68.3
 65.5
NSTAR Electric55.7
 54.8
 32.3
 26.2
82.0
 69.7
 46.5
 40.3
PSNH10.6
 9.9
 
 
11.3
 10.5
 
 
WMECO17.0
 15.5
 11.3
 9.9

D.In accordance with new revenue accounting guidance, uncollectible expense associated with customers' accounts receivable included in Operations and Maintenance expense on the statements of income is as follows:
 For the Three Months Ended For the Nine Months Ended
(Millions of Dollars)September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017
Eversource$21.5
 $14.4
 $50.7
 $30.1
CL&P4.4
 3.6
 12.1
 1.8
NSTAR Electric9.1
 8.1
 20.4
 14.9
PSNH1.6
 1.5
 4.9
 5.2

F.    Fair Value Measurements
Fair value measurement guidance is applied to derivative contracts that are not elected or designated as "normal purchases" or "normal sales" ("normal") and to the marketable securities held in trusts.  Fair value measurement guidance is also applied to valuations of the investments used to calculate the funded status of pension and PBOP plans, the nonrecurring fair value measurements of nonfinancial assets such as goodwill and AROs, and the estimated fair value of preferred stock, long-term debt and long-term debt.RRBs.

Fair Value Hierarchy:  In measuring fair value, Eversource uses observable market data when available in order to minimize the use of unobservable inputs.  Inputs used in fair value measurements are categorized into three fair value hierarchy levels for disclosure purposes.  The entire fair value measurement is categorized based on the lowest level of input that is significant to the fair value measurement.  Eversource evaluates the classification of assets and liabilities measured at fair value on a quarterly basis, and Eversource's policy is to recognize transfers between levels of the fair value hierarchy as of the end of the reporting period.  The three levels of the fair value hierarchy are described below:

Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities as of the reporting date.  Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.  



Level 2 - Inputs are quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs are observable.

Level 3 - Quoted market prices are not available.  Fair value is derived from valuation techniques in which one or more significant inputs or assumptions are unobservable.  Where possible, valuation techniques incorporate observable market inputs that can be validated to external sources such as industry exchanges, including prices of energy and energy-related products.  

Determination of Fair Value:  The valuation techniques and inputs used in Eversource's fair value measurements are described in Note 4, "Derivative Instruments," Note 5, "Marketable Securities," and Note 10,11, "Fair Value of Financial Instruments," to the financial statements.

E.

G.    Other Income, Net
Items included withinThe components of Other Income, Net on the statements of income primarily consist of income/(loss) related to equity method investments, investment income/(loss), interest income and AFUDC related to equity funds.  were as follows:
 For the Three Months Ended
 September 30, 2018 September 30, 2017
(Millions of Dollars)Eversource CL&P NSTAR Electric PSNH Eversource CL&P NSTAR Electric PSNH
Pension, SERP and PBOP Non-Service
   Income Components (1)
$14.8
 $2.0
 $9.0
 $2.0
 $7.3
 $0.4
 $4.7
 $1.5
AFUDC Equity12.0
 3.3
 4.2
 
 9.2
 3.3
 2.7
 
Equity in Earnings/(Loss) and Impairment
   of Unconsolidated Affiliates (2)
(27.9) 
 0.2
 
 5.1
 
 0.3
 
Investment Income/(Loss)1.8
 0.7
 (0.4) 0.1
 4.6
 3.1
 0.9
 0.7
Interest Income (3)
10.8
 0.9
 0.2
 9.6
 2.3
 1.1
 0.6
 0.5
Gain on Sale of Property5.0
 
 0.5
 4.4
 
 
 
 
Other0.2
 0.2
 
 
 
 
 
 
Total Other Income, Net (1)
$16.7
 $7.1
 $13.7
 $16.1
 $28.5
 $7.9
 $9.2
 $2.7
 For the Nine Months Ended
 September 30, 2018 September 30, 2017
(Millions of Dollars)Eversource CL&P NSTAR Electric PSNH Eversource CL&P NSTAR Electric PSNH
Pension, SERP and PBOP Non-Service
   Income Components (1)
$44.6
 $7.3
 $26.8
 $6.4
 $22.9
 $1.3
 $14.5
 $4.5
AFUDC Equity32.6
 9.4
 11.5
 
 23.8
 8.2
 6.7
 
Equity in Earnings/(Loss) and Impairment
   of Unconsolidated Affiliates (2)
(0.4) 
 0.6
 
 23.0
 
 0.2
 
Investment Income2.2
 0.9
 0.6
 0.2
 3.7
 2.4
 2.1
 1.2
Interest Income (3)
16.2
 2.9
 0.6
 13.3
 5.8
 3.5
 1.1
 1.6
Gain on Sale of Property5.0
 
 0.5
 4.4
 
 
 
 
Other0.5
 0.2
 
 
 
 
 
 0.1
Total Other Income, Net (1)
$100.7
 $20.7
 $40.6
 $24.3
 $79.2
 $15.4
 $24.6
 $7.4

(1)
As a result of the adoption of new accounting guidance, the non-service related components of pension, SERP and PBOP benefit costs are presented as non-operating income and recorded in Other Income, Net on the statements of income. The 2017 amounts, which were previously presented within Operations and Maintenance expense on the statements of income, have been retrospectively presented within Other Income, Net for the three and nine months ended September 30, 2017. Eversource elected the practical expedient in the accounting guidance that allows the Company to use the amounts disclosed in its Pension Benefits and Postretirement Benefits Other Than Pension footnote for the prior period presentations as the estimation basis for applying the retrospective presentation requirements.

(2) For the three months ended September 30, 2018, equity in earnings/(loss) and impairment of unconsolidated affiliates includes an other-than-temporary impairment of $32.9 million in the Access Northeast project investment. See Note 1D, "Summary of Significant Accounting Policies - Impairment of Access Northeast," for further information. For the nine months ended September 30, 2018 and 2017, Eversource had equity in earnings of $5.1includes $17.6 million and $23.0$9.7 million respectively, related to its equity method investments. For the three and nine months ended September 30, 2016 Eversource had equityof unrealized gains associated with an investment in earnings of $0.9 million and losses of $2.0 million, respectively, related to its equity method investments. Investment income/(loss) primarily relates to debt and equity securities held in trust.  For further information, see Note 5, "Marketable Securities," to the financial statements.a renewable energy fund, respectively.

F.(3) See Note 2, "Regulatory Accounting," for interest income recognized in the third quarter of 2018 for the equity return component of carrying charges on storm costs at PSNH.

H.    Other Taxes
GrossEversource's companies that serve customers in Connecticut collect gross receipts taxes levied by the state of Connecticut are collected by CL&P and Yankee Gas from their respective customers. These gross receipts taxes are shown separately with collections in Operating Revenues and with payments in Taxes Other Than Income Taxes on the statements of income as follows:
For the Three Months Ended For the Nine Months EndedFor the Three Months Ended For the Nine Months Ended
(Millions of Dollars)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017
Eversource$40.3
 $45.1
 $118.2
 $124.8
$43.5
 $40.3
 $122.5
 $118.2
CL&P37.8
 42.6
 103.5
 112.2
40.6
 37.8
 107.7
 103.5

As agents for state and local governments, Eversource's companies that serve customers in Connecticut and Massachusetts collect certain sales taxes that are recorded on a net basis with no impact on the statements of income.   

G.

Separate from the amounts above are $10.7 million and $36.1 million of amounts recorded as Taxes Other than Income Taxes for the three and nine months ended September 30, 2018, respectively, related to the future remittance to the State of Connecticut of energy efficiency funds collected from customers in Operating Revenues. These amounts are shown separately with collections in Operating Revenues and expenses in Taxes Other than Income Taxes on the Eversource and CL&P statements of income.  

I.    Supplemental Cash Flow Information
Non-cash investing activities include plant additions included in Accounts Payable as follows:
(Millions of Dollars)As of September 30, 2017 As of September 30, 2016As of September 30, 2018 As of September 30, 2017
Eversource$307.7
 $203.6
$303.7
 $307.7
CL&P113.4
 64.5
103.0
 113.4
NSTAR Electric55.4
 39.4
62.5
 92.5
PSNH39.6
 31.0
48.3
 39.6
WMECO37.1
 17.6

The following table reconciles cash and cash equivalents as reported on the balance sheets to the cash, cash equivalents, and restricted cash as reported on the statements of cash flows:
 As of September 30, 2018 As of December 31, 2017
(Millions of Dollars)Eversource CL&P NSTAR Electric PSNH Eversource CL&P NSTAR Electric PSNH
Cash and Cash Equivalents as reported on the
   Balance Sheets
$59.1
 $1.0
 $2.4
 $7.5
 $38.2
 $6.0
 $1.8
 $0.9
Restricted cash included in:               
Prepayments and Other Current Assets51.4
 3.5
 12.9
 26.8
 24.4
 3.1
 12.8
 0.5
Marketable Securities20.9
 0.4
 0.1
 0.7
 23.3
 0.5
 0.1
 0.8
Other Long-Term Assets3.2
 
 
 3.2
 
 
 
 
Cash, Cash Equivalents, and Restricted Cash
   reported on the Statements of Cash Flows
$134.6
 $4.9
 $15.4
 $38.2
 $85.9
 $9.6
 $14.7
 $2.2

Restricted cash included in Prepayments and Other Current Assets and Other Long-Term Assets, shown above, primarily represents required ISO-NE cash deposits and cash collections related to the PSNH RRB customer charges that are held in trust. Restricted cash included in Marketable Securities, shown above, represents money market funds held in trusts to fund certain non-qualified executive benefits and restricted trusts to fund CYAPC and YAEC's spent nuclear fuel removal obligations of their nuclear fuel storage facilities.

As a result of implementing new accounting guidance for the statement of cash flows, the reclassification of the change in restricted cash balances, which was previously classified as operating activities, resulted in a decrease of $30.2 million in the total cash and restricted cash change for the nine months ended September 30, 2017.

J.    Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act became law, which amended existing federal tax rules to reduce U.S. federal corporate income tax rate from 35 percent to 21 percent effective January 1, 2018. Our regulated companies have established a liability to reflect the difference between the 35 percent federal corporate income tax rate included in rates charged to customers and the 21 percent federal income tax rate. Eversource, CL&P, NSTAR Electric and PSNH's effective tax rate has decreased, as compared to the prior period, as a result of incurring a lower federal income tax expense, which is reflected on the statements of income for the three and nine months ended September 30, 2018. See Note 16, "Revenues," for further information on the amounts deducted from revenues.

Eversource's annual return to provision process in the third quarter of 2018 resulted in significant benefits as a result of both tax reform and changes in Connecticut state tax legislation that resulted in the remeasurement of a tax reserve.  These benefits from both federal tax reform and Connecticut tax law change reduced income tax expense by an aggregate $18 million for the three months ended September 30, 2018.

2.    REGULATORY ACCOUNTING

Eversource's Regulatedutility companies are subject to rate regulation that is based on cost recovery and meets the criteria for application of accounting guidance for rate-regulated operations, which considers the effect of regulation on the timing of the recognition of certain revenues and expenses. The Regulatedregulated companies' financial statements reflect the effects of the rate-making process.  The rates charged to the customers of Eversource's Regulatedregulated companies are designed to collect each company's costs to provide service, including a return on investment.  

Management believes it is probable that each of the Regulatedregulated companies will recover its respective investments in long-lived assets, including regulatory assets.  If management were to determine that it could no longer apply the accounting guidance applicable to rate-regulated enterprises to any of the Regulatedregulated companies' operations, or if management could not conclude it is probable that costs would be recovered from customers in future rates, the costs would be charged to net income in the period in which the determination is made.



Regulatory Assets:  The components of regulatory assets were as follows:
EversourceAs of September 30, 2017 As of December 31, 2016
As of September 30, 2018 As of December 31, 2017
(Millions of Dollars)As of September 30, 2017 As of December 31, 2016Eversource CL&P 
NSTAR
Electric
 PSNH Eversource CL&P 
NSTAR
Electric
 PSNH
Benefit Costs $1,988.4
 $447.4
 $541.2
 $172.0
 $2,068.8
 $469.2
 $560.7
 $212.3
Income Taxes, Net720.7
 448.1
 112.9
 15.6
 768.9
 453.8
 113.2
 21.7
Securitized Stranded Costs618.6
 
 
 618.6
 
 
 
 
Deferred Costs from Generation Asset Sale
 
 
 
 516.1
 
 
 516.1
Storm Restoration Costs, Net598.5
 319.7
 222.1
 56.7
 404.8
 216.7
 146.6
 41.5
Regulatory Tracker Mechanisms257.8
 39.5
 128.4
 74.9
 509.9
 85.3
 273.0
 116.4
Derivative Liabilities385.1
 423.3
360.0
 359.9
 
 
 367.2
 362.3
 
 
Income Taxes, Net652.7
 644.5
Storm Restoration Costs330.1
 385.3
Goodwill-related449.0
 464.4
352.6
 
 302.7
 
 365.2
 
 313.6
 
Regulatory Tracker Mechanisms470.7
 576.6
Asset Retirement Obligations104.8
 99.3
87.5
 31.8
 41.3
 3.3
 101.0
 30.3
 39.0
 17.0
Other Regulatory Assets65.8
 115.1
169.2
 27.4
 71.7
 12.4
 137.4
 27.6
 78.4
 15.8
Total Regulatory Assets4,252.0
 4,526.3
5,153.3
 1,673.8

1,420.3

953.5

5,239.3
 1,645.2

1,524.5

940.8
Less: Current Portion746.1
 887.6
436.7
 128.8
 193.5
 61.4
 741.9
 200.3
 333.9
 130.1
Total Long-Term Regulatory Assets$3,505.9
 $3,638.7
$4,716.6
 $1,545.0

$1,226.8

$892.1

$4,497.4
 $1,444.9

$1,190.6

$810.7

 As of September 30, 2017 As of December 31, 2016
(Millions of Dollars)CL&P 
NSTAR
Electric
 PSNH WMECO CL&P 
NSTAR
Electric
 PSNH WMECO
Benefit Costs$415.8
 $436.7
 $183.2
 $84.8
 $429.3
 $438.6
 $184.2
 $86.7
Derivative Liabilities381.6
 2.4
 
 
 420.5
 2.8
 
 
Income Taxes, Net441.1
 92.4
 22.3
 30.5
 437.0
 89.7
 24.2
 30.8
Storm Restoration Costs195.7
 112.4
 9.2
 12.8
 239.8
 112.5
 17.1
 15.9
Goodwill-related
 385.5
 
 
 
 398.7
 
 
Regulatory Tracker Mechanisms87.9
 201.1
 108.0
 44.4
 123.9
 257.3
 104.5
 46.7
Asset Retirement Obligations35.1
 33.9
 16.8
 4.5
 33.2
 31.9
 16.2
 4.2
Other Regulatory Assets30.0
 15.5
 17.6
 5.4
 43.4
 15.6
 16.5
 7.1
Total Regulatory Assets1,587.2

1,279.9

357.1

182.4

1,727.1

1,347.1

362.7

191.4
Less:  Current Portion275.0
 230.6
 112.5
 60.6
 335.5
 289.4
 117.2
 64.1
Total Long-Term Regulatory Assets$1,312.2

$1,049.3

$244.6

$121.8

$1,391.6

$1,057.7

$245.5

$127.3
Securitized Stranded Costs: On May 8, 2018, a subsidiary of PSNH issued $635.7 million of securitized RRBs to finance PSNH's unrecovered stranded costs associated with the divestiture of its generation assets. Securitized regulatory assets, which are not earning an equity return, are being recovered over the amortization period of the associated RRBs. The PSNH RRBs are expected to be repaid by February 1, 2033. The stranded costs related to the difference between the carrying value and the fair value less costs to sell the thermal generation assets were reflected as a deferred cost in the table above as of December 31, 2017, and are reflected in the securitized stranded costs balance as of September 30, 2018.

Storm Restoration Costs, Net:
2018 Storms: In 2018, several significant storms caused extensive damage to our electric distribution systems and significant customer outages across all three states. A storm must meet certain criteria to qualify for deferral and recovery with the criteria specific to each state jurisdiction and utility company. Once a storm qualifies for recovery, all qualifying expenses incurred during storm restoration efforts are deferred and recovered from customers. Costs for storms that do not meet the specific criteria are expensed as incurred. The 2018 storms resulted in deferred storm restoration costs of approximately $266 million ($149 million for CL&P, $101 million for NSTAR Electric, and $16 million for PSNH), which were reflected in Storm Restoration Costs, Net in the table above as of September 30, 2018. Management believes the storm restoration costs were prudent and meet the criteria for specific cost recovery in Connecticut, Massachusetts and New Hampshire, and that recovery from customers is probable through the applicable regulatory recovery processes.

On September 17, 2018, the NHPUC approved the recovery of $49 million, plus carrying charges, in storm costs incurred from August 2011 through March 2013 and the transfer of funding from PSNH’s major storm funding reserve to offset those costs. The costs of these storms (excluding the equity return component of the carrying charges) were deferred as regulatory assets, and the funding reserve collected from customers was accrued as a regulatory liability. The storm cost deferral is separate from the major storm funding reserve that is being collected from customers. As a result of the approval, PSNH recognized $8.7 million (pre-tax) within Other Income, Net on our statement of income in the third quarter of 2018 for the equity return component of the carrying charges, which have been billed and collected. Storm costs incurred from March 2013 through 2016 are currently being audited by the NHPUC staff.

Regulatory Costs in Other Long-Term Assets:  Eversource's Regulatedregulated companies had $108.7$104.6 million (including $3.9$27.6 million for CL&P, $42.3$53.3 million for NSTAR Electric $18.5and $3.9 million for PSNH,PSNH) and $25.7 million for WMECO) and $86.3$105.8 million (including $5.9$18.2 million for CL&P, $35.0$42.7 million for NSTAR Electric $8.2and $27.2 million for PSNH, and $20.1 million for WMECO)PSNH) of additional regulatory costs as of September 30, 20172018 and December 31, 2016,2017, respectively, that were included in Other Long-Term Assetslong-term assets on the balance sheets.  These amounts represent incurred costs for which recovery has not yet been specifically approved by the applicable regulatory agency.  However, based on regulatory policies or past precedent on similar costs, management believes it is probable that these costs will ultimately be approved and recovered from customers in rates.



Regulatory Liabilities:  The components of regulatory liabilities were as follows:
EversourceAs of September 30, 2017 As of December 31, 2016
As of September 30, 2018 As of December 31, 2017
(Millions of Dollars)As of September 30, 2017 As of December 31, 2016Eversource CL&P 
NSTAR
Electric
 PSNH Eversource CL&P 
NSTAR
Electric
 PSNH
Excess ADIT due to Tax Cuts and Jobs Act$2,876.9
 $1,026.3
 $1,100.5
 $397.4
 $2,882.0
 $1,031.6
 $1,087.9
 $405.1
Cost of Removal$470.3
 $459.7
516.4
 37.8
 305.7
 24.9
 502.1
 23.2
 293.8
 37.9
Benefit Costs125.5
 136.2
127.1
 
 107.2
 0.5
 132.3
 
 112.6
 
Regulatory Tracker Mechanisms175.8
 145.3
345.6
 111.9
 168.3
 38.5
 136.7
 34.6
 77.8
 5.0
AFUDC - Transmission65.4
 65.8
68.6
 47.8
 20.8
 
 67.1
 48.8
 18.3
 
Revenue Subject to Refund36.2
 8.3
 3.7
 9.4
 
 
 
 
Other Regulatory Liabilities33.4
 42.1
80.7
 25.7
 28.3
 2.8
 45.2
 12.9
 3.7
 2.7
Total Regulatory Liabilities870.4
 849.1
4,051.5
 1,257.8

1,734.5

473.5

3,765.4
 1,151.1

1,594.1

450.7
Less: Current Portion170.2
 146.8
344.7
 126.6
 168.2
 39.7
 128.1
 39.0
 79.6
 6.3
Total Long-Term Regulatory Liabilities$700.2
 $702.3
$3,706.8
 $1,131.2

$1,566.3

$433.8

$3,637.3
 $1,112.1

$1,514.5

$444.4
 As of September 30, 2017 As of December 31, 2016
(Millions of Dollars)CL&P 
NSTAR
Electric
 PSNH WMECO CL&P 
NSTAR
Electric
 PSNH WMECO
Cost of Removal$40.5
 $278.8
 $40.5
 $11.7
 $38.8
 $271.6
 $44.1
 $8.6
Benefit Costs
 106.0
 
 
 
 113.1
 
 
Regulatory Tracker Mechanisms57.1
 65.5
 5.6
 12.7
 37.2
 63.7
 10.7
 14.7
AFUDC - Transmission49.2
 7.7
 
 8.5
 50.2
 6.9
 
 8.7
Other Regulatory Liabilities21.3
 0.4
 2.6
 
 21.0
 0.2
 2.7
 0.1
Total Regulatory Liabilities168.1

458.4

48.7

32.9

147.2

455.5

57.5

32.1
Less:  Current Portion69.3
 65.5
 7.9
 10.2
 47.1
 63.7
 12.7
 14.9
Total Long-Term Regulatory Liabilities$98.8

$392.9

$40.8

$22.7

$100.1

$391.8

$44.8

$17.2

Revenue Subject to Refund: The regulatory liability balance represents the difference between the 35 percent federal corporate income tax rate included in rates charged to customers and the 21 percent federal income tax rate, effective January 1, 2018 as a result of the Tax Cuts and Jobs Act. Effective February 1, 2018 for NSTAR Electric, May 1, 2018 for CL&P and July 1, 2018 for NSTAR Gas, base rates charged to customers have been adjusted to reflect the new federal income tax rate. As part of CL&P's 2018 rate case settlement, a new capital tracker regulatory mechanism was established, which includes the refund of the reserve for the higher federal corporate income tax rate to customers between January 1, 2018 through April 30, 2018 in rates, from July 1, 2018 through December 31, 2018.

3.    PROPERTY, PLANT AND EQUIPMENT AND ACCUMULATED DEPRECIATION

The following tables summarize property, plant and equipment by asset category:
EversourceAs of September 30, 2017 As of December 31, 2016
(Millions of Dollars) 
Distribution - Electric$14,217.3
 $13,716.9
Distribution - Natural Gas3,158.1
 3,010.4
Transmission - Electric8,918.2
 8,517.4
Generation1,215.8
 1,224.2
Electric and Natural Gas Utility27,509.4
 26,468.9
Other (1)
679.9
 591.6
Property, Plant and Equipment, Gross28,189.3
 27,060.5
Less:  Accumulated Depreciation   
Electric and Natural Gas Utility   (6,838.5) (6,480.4)
Other(274.4) (242.0)
Total Accumulated Depreciation(7,112.9) (6,722.4)
Property, Plant and Equipment, Net21,076.4
 20,338.1
Construction Work in Progress (2)
1,460.9
 1,012.4
Total Property, Plant and Equipment, Net$22,537.3
 $21,350.5

(1) These assets are primarily comprised of building improvements, computer software, hardware and equipment at Eversource Service.
(2) As of September 30, 2017, the total CWIP related to NPT was approximately $201 million.
EversourceAs of September 30, 2018 As of December 31, 2017
(Millions of Dollars) 
Distribution - Electric$14,794.9
 $14,410.5
Distribution - Natural Gas3,371.2
 3,244.2
Transmission - Electric9,733.6
 9,270.9
Distribution - Water1,594.3
 1,558.4
Solar109.3
 36.2
Utility29,603.3
 28,520.2
Other (1)
759.0
 693.7
Property, Plant and Equipment, Gross30,362.3
 29,213.9
Less:  Accumulated Depreciation   
Utility   (7,065.4) (6,846.9)
Other(325.4) (286.9)
Total Accumulated Depreciation(7,390.8) (7,133.8)
Property, Plant and Equipment, Net22,971.5
 22,080.1
Construction Work in Progress1,996.2
 1,537.4
Total Property, Plant and Equipment, Net$24,967.7
 $23,617.5
As of September 30, 2017 As of December 31, 2016As of September 30, 2018 As of December 31, 2017
(Millions of Dollars)CL&P 
NSTAR
Electric
 PSNH WMECO CL&P NSTAR Electric PSNH WMECOCL&P 
NSTAR
Electric
 PSNH CL&P 
NSTAR
Electric
 PSNH
Distribution$5,797.6
 $5,543.1
 $2,048.8
 $868.1
 $5,562.9
 $5,402.3
 $1,949.8
 $841.9
$6,027.1
 $6,651.1
 $2,157.0
 $5,888.3
 $6,479.0
 $2,083.4
Transmission4,061.2
 2,545.0
 1,115.7
 1,147.9
 3,912.9
 2,435.8
 1,059.3
 1,061.1
4,513.7
 3,915.5
 1,255.6
 4,239.9
 3,821.2
 1,161.3
Generation
 
 1,179.8
 36.0
 
 
 1,188.2
 36.0
Solar
 109.3
 
 
 36.2
 
Property, Plant and Equipment, Gross9,858.8
 8,088.1
 4,344.3
 2,052.0
 9,475.8
 7,838.1
 4,197.3
 1,939.0
10,540.8
 10,675.9
 3,412.6
 10,128.2
 10,336.4
 3,244.7
Less: Accumulated Depreciation(2,207.0) (2,143.8) (1,315.7) (356.5) (2,082.4) (2,025.4) (1,254.7) (338.8)(2,297.4) (2,673.0) (762.1) (2,239.0) (2,550.2) (751.8)
Property, Plant and Equipment, Net7,651.8
 5,944.3
 3,028.6
 1,695.5
 7,393.4
 5,812.7
 2,942.6
 1,600.2
8,243.4
 8,002.9
 2,650.5
 7,889.2
 7,786.2
 2,492.9
Construction Work in Progress456.2
 324.4
 139.3
 74.1
 239.0
 239.1
 96.7
 78.1
510.3
 573.2
 176.0
 381.8
 460.3
 149.4
Total Property, Plant and Equipment, Net$8,108.0
 $6,268.7
 $3,167.9
 $1,769.6
 $7,632.4
 $6,051.8
 $3,039.3
 $1,678.3
$8,753.7
 $8,576.1
 $2,826.5
 $8,271.0
 $8,246.5
 $2,642.3

(1)
These assets are primarily comprised of building improvements, computer software, hardware and equipment at Eversource Service.



4.    DERIVATIVE INSTRUMENTS

The Regulatedelectric and natural gas companies purchase and procure energy and energy-related products, which are subject to price volatility, for their customers.  The costs associated with supplying energy to customers are recoverable from customers in future rates.  The RegulatedThese regulated companies manage the risks associated with the price volatility of energy and energy-related products through the use of derivative and non-derivative contracts.  

Many of the derivative contracts meet the definition of, and are designated as, normal and qualify for accrual accounting under the applicable accounting guidance.  The costs and benefits of derivative contracts that meet the definition of normal are recognized in Operating Expenses or Operating Revenues on the statements of income, as applicable, as electricity or natural gas is delivered.

Derivative contracts that are not designated as normal are recorded at fair value as current or long-term Derivative Assets or Derivative Liabilities on the balance sheets.  For the Regulatedelectric and natural gas companies, regulatory assets or regulatory liabilities are recorded to offset the fair values of derivatives, as contract settlement amounts are recovered from, or refunded to, customers in their respective energy supply rates.  



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, on the balance sheets.  The following table presents the gross fair values of contracts, categorized by risk type, and the net amounts recorded as current or long-term derivative assets or liabilities:
As of September 30, 2017 As of December 31, 2016 As of September 30, 2018 As of December 31, 2017
(Millions of Dollars)
Commodity Supply and Price Risk
Management
 
Netting (1)
 
Net Amount
Recorded as a Derivative
 Commodity Supply and Price Risk
Management
 
Netting (1)
 
Net Amount
Recorded as
a Derivative
Fair Value Hierarchy 
Commodity Supply and Price Risk
Management
 
Netting (1)
 
Net Amount
Recorded as a Derivative
 Commodity Supply and Price Risk
Management
 
Netting (1)
 
Net Amount
Recorded as
a Derivative
Current Derivative Assets:                       
Level 2:           
Eversource$
 $
 $
 $6.0
 $
 $6.0
Level 2 $0.8
 $(0.5) $0.3
 $
 $
 $
Level 3:           
CL&P10.4
 (7.7) 2.7
 13.9
 (9.4) 4.5
Level 3 8.8
 (4.8) 4.0
 9.5
 (7.1) 2.4
Long-Term Derivative Assets:                       
Level 2:           
Eversource$
 $
 $
 $0.3
 $(0.1) $0.2
Level 3:           
CL&P74.3
 (6.9) 67.4
 77.3
 (11.7) 65.6
Level 3 75.0
 (2.3) 72.7
 71.9
 (5.3) 66.6
Current Derivative Liabilities:                       
Level 2:           
Eversource$(1.5) $0.4
 $(1.1) $
 $
 $
Level 3:           
Eversource(62.2) 
 (62.2) (79.7) 
 (79.7)Level 2 
 
 
 (4.5) 
 (4.5)
CL&P(59.9) 
 (59.9) (77.8) 
 (77.8)Level 3 (50.8) 
 (50.8) (54.4) 
 (54.4)
NSTAR Electric(2.3) 
 (2.3) (1.9) 
 (1.9)
Long-Term Derivative Liabilities:                       
Level 3:           
Eversource$(391.9) $
 $(391.9) $(413.7) $
 $(413.7)Level 2 (0.1) 
 (0.1) (0.4) 
 (0.4)
CL&P(391.8) 
 (391.8) (412.8) 
 (412.8)Level 3 (385.8) 
 (385.8) (376.9) 
 (376.9)
NSTAR Electric(0.1) 
 (0.1) (0.9) 
 (0.9)

(1) 
Amounts represent derivative assets and liabilities that Eversource elected to record net on the balance sheets.  These amounts are subject to master netting agreements or similar agreements for which the right of offset exists.

For further information on the fair value of derivative contracts, see Note 1D,1F, "Summary of Significant Accounting Policies - Fair Value Measurements," to the financial statements.

Derivative Contracts at Fair Value with Offsetting Regulatory Amounts
Commodity Supply and Price Risk Management:  As required by regulation, CL&P, along with UI, has capacity-related contracts with generation facilities.  CL&P has a sharing agreement with UI, with 80 percent of the costs or benefits of each contract borne by or allocated to CL&P and 20 percent borne by or allocated to UI.  The combined capacity of these contracts is 787 MW.  The capacity contracts extend through 2026 and obligate both CL&P and UI to make or receive payments on a monthly basis to or from the generation facilities based on the difference between a set capacity price and the capacity market price received in the ISO-NE capacity markets.  In addition, CL&P has a contract to purchase 0.1 million MWh of energy per year through 2020.   

NSTAR Electric has a renewable energy contract to purchase 0.1 million MWh of energy per year through 2018 and a capacity-related contract to purchase up to 35 MW per year through 2019.

As of September 30, 20172018 and December 31, 2016,2017, Eversource had New York Mercantile Exchange ("NYMEX") financial contracts for natural gas futures in order to reduce variability associated with the purchase price of approximately 10.410.6 million and 9.29.5 million MMBtu of natural gas, respectively.

For the three months ended September 30, 20172018 and 2016,2017, there were gains of $0.6$1.6 million and losses of $53.4$0.6 million, respectively, deferred as regulatory costs, which reflect the change in fair value associated with Eversource's derivative contracts. For the nine months ended September 30, 2018 and 2017, and 2016, thesethere were losses were $30.3of $25.8 million and $127.8$30.3 million, respectively.



Fair Value Measurements of Derivative Instruments
Derivative contracts classified as Level 2 in the fair value hierarchy relate to the financial contracts for natural gas futures.  Prices are obtained from broker quotes and are based on actual market activity.  The contracts are valued using NYMEX natural gas prices.  Valuations of these contracts also incorporate discount rates using the yield curve approach.  

The fair value of derivative contracts classified as Level 3 utilizes significant unobservable inputs.  The fair value is modeled using income techniques, such as discounted cash flow valuations adjusted for assumptions relatingrelated to exit price.  Significant observable inputs for valuations of these contracts include energy and energy-related product prices in future years for which quoted prices in an active market exist.  Fair value measurements categorized in Level 3 of the fair value hierarchy are prepared by individuals with expertise in valuation techniques, pricing of energy and energy-related products, and accounting requirements.  The future power and capacity prices for periods that are not quoted in an active market or established at auction are based on available market data and are escalated based on estimates of inflation in order to address the full term of the contract.  

Valuations of derivative contracts using a discounted cash flow methodology include assumptions regarding the timing and likelihood of scheduled payments and also reflect non-performance risk, including credit, using the default probability approach based on the counterparty's credit rating for assets and the Company's credit rating for liabilities.  Valuations incorporate estimates of premiums or discounts that would be required by a market participant to arrive at an exit price, using historical market transactions adjusted for the terms of the contract.  

The following is a summary of Eversource's, including CL&P's and NSTAR Electric's, Level 3 derivative contracts and the range of the significant unobservable inputs utilized in the valuations over the duration of the contracts:
 As of September 30, 2017 As of December 31, 2016
 Range Period Covered Range Period Covered
Capacity Prices:                   
CL&P$5.00
  8.70
 per kW-Month 2021 - 2026 $5.50
  8.70
 per kW-Month 2020 - 2026
Forward Reserve:                   
CL&P$1.00
  2.00
 per kW-Month 2017 - 2024 $1.40
  2.00
 per kW-Month 2017 - 2024
REC Prices:                   
NSTAR Electric$15.75
  22.00 per REC 2017 - 2018 $24.00
  29.00 per REC 2017 - 2018
 As of September 30, 2018 As of December 31, 2017
CL&PRange Period Covered Range Period Covered
Capacity Prices$4.30
  7.44
 per kW-Month 2022-2026 $5.00
  8.70
 per kW-Month 2021 - 2026
Forward Reserve$0.95
  2.00
 per kW-Month 2019-2024 $1.00
  2.00
 per kW-Month 2018 - 2024

Exit price premiums of 1 percent through 1816 percent are also applied onto these contracts and reflect the uncertainty and illiquidity premiums that would be required based on the most recent market activity available for similar type contracts.

Significant increases or decreases in future energy, capacity or capacityforward reserve prices in isolation would decrease or increase, respectively, the fair value of the derivative liability.  Any increases in risk premiums would increase the fair value of the derivative liability.  Changes in these fair values are recorded as a regulatory asset or liability and do not impact net income.  

Valuations using significant unobservable inputs:  The following table presents changes in the Level 3 category of derivative assets and derivative liabilities measured at fair value on a recurring basis.  The derivative assets and liabilities are presented on a net basis.
For the Three Months Ended September 30,
2017 2016
CL&PFor the Three Months Ended September 30, For the Nine Months Ended September 30,
(Millions of Dollars)Eversource CL&P 
NSTAR  
Electric
 Eversource CL&P NSTAR  
Electric
2018 2017 2018 2017
Derivatives, Net:                  
Fair Value as of Beginning of Period$(397.1) $(394.8) $(2.3) $(412.6) $(411.3) $(1.3)$(369.3) $(394.8) $(362.3) $(420.5)
Net Realized/Unrealized Gains/Losses Included in Regulatory Assets and Liabilities0.5
 (0.7) 1.2
 (52.3) (49.8) (2.5)
Net Realized/Unrealized Gains/(Losses) Included in Regulatory Assets and Liabilities1.2
 (0.7) (27.0) (15.9)
Settlements12.6
 13.9
 (1.3) 21.2
 20.1
 1.1
8.2
 13.9
 29.4
 54.8
Fair Value as of End of Period$(384.0) $(381.6) $(2.4) $(443.7) $(441.0) $(2.7)$(359.9) $(381.6) $(359.9) $(381.6)
           
For the Nine Months Ended September 30,
2017 2016
(Millions of Dollars)Eversource CL&P NSTAR  
Electric
 Eversource CL&P NSTAR  
Electric
Derivatives, Net:           
Fair Value as of Beginning of Period$(423.3) $(420.5) $(2.8) $(380.9) $(380.8) $(0.1)
Net Realized/Unrealized Losses Included in Regulatory Assets and Liabilities(17.9) (15.9) (2.0) (128.9) (122.0) (6.9)
Settlements57.2
 54.8
 2.4
 66.1
 61.8
 4.3
Fair Value as of End of Period$(384.0) $(381.6) $(2.4) $(443.7) $(441.0) $(2.7)



5.    MARKETABLE SECURITIES

Eversource maintains trustsholds marketable securities that hold marketable securitiesare primarily used to fund certain non-qualified executive benefits.  TheseThe trusts that hold marketable securities are not subject to regulatory oversight by state or federal agencies.  CYAPC and YAEC maintain legally restricted trusts, each of which holds marketable securities, to fund the spent nuclear fuel removal obligations of their nuclear fuel storage facilities.

TradingEquity Securities: Eversource has elected to record certainIn accordance with new accounting guidance, unrealized gains and losses on equity securities as trading securities, with the changes in fair valuesare recorded in Other Income, Net on the statements of income. As of December 31, 2016, these securities were classified as Level 1 in theThe fair value hierarchy and totaled $9.6 million.  Theseof equity securities were sold during the first quarter of 2017 and were no longer heldsubject to this guidance as of September 30, 2017.2018 and December 31, 2017 was $54.5 million and $50 million, respectively.  For the three and nine months ended September 30, 2016, net2018, there were unrealized gains on these securities of $0.1$2.4 million and $0.6$2.6 million, respectively, were recorded in Other Income, Net on the statements of income. Dividend income is recorded in Other Income, Net when dividends are declared.  related to these equity securities.

Available-for-Sale Securities:  The following is a summary of available-for-sale securities, which are recorded at fair value and are included in current and long-term Marketable Securities on the balance sheets.
 As of September 30, 2017 As of December 31, 2016
Eversource
(Millions of Dollars)
Amortized Cost 
Pre-Tax
Unrealized Gains
 
Pre-Tax
Unrealized
Losses
 Fair Value Amortized Cost 
Pre-Tax
Unrealized Gains
 
Pre-Tax
Unrealized
Losses
 Fair Value
Debt Securities$286.5
 $5.5
 $(0.5) $291.5
 $296.2
 $1.1
 $(2.1) $295.2
Equity Securities210.7
 81.5
 
 292.2
 203.3
 62.3
 (1.2) 264.4

Eversource's debt and equity securities also include CYAPC's and YAEC's marketable securities held in nuclear decommissioning trusts, in the amountswhich had fair values of $489.1$258.0 million and $466.7$263.8 million as of September 30, 20172018 and December 31, 2016,2017, respectively.  Unrealized gains and losses for these nuclear decommissioning trusts are subject to regulatory accounting treatment and are recorded in Marketable Securities with the corresponding offset to Other Long-Term Liabilities on the balance sheets, with no impact on the statements of income.



Available-for-Sale Debt Securities: The following is a summary of the available-for-sale debt securities, which are recorded at fair value and are included in current and long-term Marketable Securities on the balance sheets.
 As of September 30, 2018 As of December 31, 2017
Eversource
(Millions of Dollars)
Amortized Cost 
Pre-Tax
Unrealized Gains
 
Pre-Tax
Unrealized
Losses
 Fair Value Amortized Cost 
Pre-Tax
Unrealized Gains
 
Pre-Tax
Unrealized
Losses
 Fair Value
Debt Securities$292.8
 $0.8
 $(2.7) $290.9
 $284.9
 $3.2
 $(1.1) $287.0

Eversource's debt securities include CYAPC's and YAEC's marketable securities held in nuclear decommissioning trusts in the amounts of $247.1 million and $242.3 million as of September 30, 2018 and December 31, 2017, respectively.

Unrealized Lossesgains and Other-than-Temporary Impairment:losses on available-for-sale debt securities held in Eversource's non-qualified benefit trust are recorded in Accumulated Other Comprehensive Income. There have been no significant unrealized losses, other-than-temporary impairments, or credit losses for the three and nine months ended September 30, 20172018 and 2016.2017.  Factors considered in determining whether a credit loss exists include the duration and severity of the impairment, adverse conditions specifically affecting the issuer, and the payment history, ratings and rating changes of the security.  For asset-backed debt securities, underlying collateral and expected future cash flows are also evaluated.

As of September 30, 2018, the contractual maturities of available-for-sale debt securities were as follows:  
Eversource
(Millions of Dollars)
Amortized Cost Fair Value
Less than one year (1)
$28.5
 $28.5
One to five years48.7
 48.3
Six to ten years61.8
 61.2
Greater than ten years153.8
 152.9
Total Debt Securities$292.8
 $290.9

(1)
Amounts in the Less than one year category include securities in the CYAPC and YAEC nuclear decommissioning trusts, which are restricted and are classified in long-term Marketable Securities on the balance sheets.

Realized Gains and Losses:  Realized gains and losses on available-for-sale securities are recorded in Other Income, Net for Eversource's non-qualified benefit trust and are offset in Other Long-Term Liabilities for CYAPC and YAEC.  Eversource utilizes the specific identification basis method for the Eversource non-qualified benefit trust, and the average cost basis method for the CYAPC and YAEC nuclear decommissioning trusts to compute the realized gains and losses on the sale of available-for-salemarketable securities.

Contractual Maturities:  As of September 30, 2017, the contractual maturities of available-for-sale debt securities were as follows:  
Eversource
(Millions of Dollars)
Amortized Cost Fair Value
Less than one year (1)
$40.2
 $40.2
One to five years56.7
 57.6
Six to ten years52.6
 54.1
Greater than ten years137.0
 139.6
Total Debt Securities$286.5
 $291.5

(1)
Amounts in the Less than one year category include securities in the CYAPC and YAEC nuclear decommissioning trusts, which are restricted and are classified in long-term Marketable Securities on the balance sheets.




Fair Value Measurements:  The following table presents the marketable securities recorded at fair value on a recurring basis by the level in which they are classified within the fair value hierarchy:
Eversource
(Millions of Dollars)
As of September 30, 2017 As of December 31, 2016As of September 30, 2018 As of December 31, 2017
Level 1:       
Mutual Funds and Equities$292.2
 $274.0
$312.5
 $313.8
Money Market Funds21.8
 54.8
20.9
 23.3
Total Level 1$314.0
 $328.8
$333.4
 $337.1
Level 2:      
U.S. Government Issued Debt Securities (Agency and Treasury)$69.0
 $63.0
$80.8
 $70.2
Corporate Debt Securities56.1
 41.1
41.8
 50.9
Asset-Backed Debt Securities20.4
 18.5
14.3
 21.2
Municipal Bonds113.6
 107.5
121.2
 110.7
Other Fixed Income Securities10.6
 10.3
11.9
 10.7
Total Level 2$269.7
 $240.4
$270.0
 $263.7
Total Marketable Securities$583.7
 $569.2
$603.4
 $600.8

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 instrumentinstruments 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.    SHORT-TERM AND LONG-TERM DEBT

Short-Term Debt - Commercial Paper Programs and Credit Agreements: Eversource parent has a $1.45 billion commercial paper program allowing Eversource parent to issue commercial paper as a form of short-term debt.  As of September 30, 2017 and December 31, 2016, Eversource parent had $917.0 million and approximately $1.0 billion, respectively, in short-term borrowings outstanding under the Eversource parent commercial paper program, leaving $533.0 million and $428.0 million of available borrowing capacity as of September 30, 2017 and December 31, 2016, respectively. The weighted-average interest rate on these borrowings as of September 30, 2017 and December 31, 2016 was 1.34 percent and 0.88 percent, respectively. As of September 30, 2017, there were intercompany loans from Eversource parent of $202.3 million to PSNH and $96.9 million to WMECO.  As of December 31, 2016, there were intercompany loans from Eversource parent of $80.1 million to CL&P, $160.9 million to PSNH and $51.0 million to WMECO.  Eversource parent, CL&P, PSNH, WMECO, NSTAR Gas and Yankee Gas are also parties to a five-year $1.45 billion revolving credit facility. The revolving credit facility terminates on September 4, 2021.  The revolving credit facilityDecember 8, 2022 and serves to backstop Eversource parent's $1.45 billion commercial paper program.  

NSTAR Electric has a $650 million commercial paper program allowing NSTAR Electric to issue commercial paper as a form of short-term debt. NSTAR Electric is also a party to a five-year $650 million revolving credit facility. The revolving credit facility terminates on December 8, 2022 and serves to backstop NSTAR Electric's $650 million commercial paper program.  

There were no borrowings outstanding on either the Eversource parent or NSTAR Electric revolving credit facilityfacilities as of September 30, 2017 and2018 or December 31, 2016.2017. Eversource's water distribution segment has a $100 million revolving credit facility, which expires on August 19, 2019, and there were no amounts outstanding as of September 30, 2018 and $76.0 million outstanding as of December 31, 2017.

ExceptThe amount of borrowings outstanding and available under the commercial paper programs were as described below, amountsfollows:
 Borrowings Outstanding as of Available Borrowing Capacity as of Weighted-Average Interest Rate as of
 September 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017
(Millions of Dollars)     
Eversource Parent Commercial Paper Program$826.7
 $979.3
 $623.3
 $470.7
 2.34% 1.86%
NSTAR Electric Commercial Paper Program240.5
 234.0
 409.5
 416.0
 2.17% 1.55%

Amounts outstanding under the commercial paper programs and revolving credit facility are included in Notes Payable for Eversource and NSTAR Electric and are classified in current liabilities on the balance sheets as all borrowings are outstanding for no more than 364 days at one time.  As a result of the Eversource parent long-term debt issuances on January 8, 2018, the net proceeds of which were used to repay short-term borrowings outstanding under its commercial paper program, $201.2 million of commercial paper borrowings under the Eversource parent commercial paper program were reclassified as Long-Term Debt as of December 31, 2017.

As of September 30, 2018, there were intercompany loans from Eversource parent of $45.9 million to CL&P, $46.6 million to PSNH and $16.0 million to Harbor Electric Energy Company, a wholly-owned subsidiary of NSTAR Electric ("HEEC"). Intercompany loans from Eversource parent to other Eversource subsidiaries primarily included $196.9 million to Eversource Service, $108.0 million to Aquarion, and $117.2 million to NSTAR Gas as of September 30, 2018. As of December 31, 2017, there were intercompany loans from Eversource parent of $69.5 million to CL&P PSNH and WMECO$262.9 million to PSNH. Intercompany loans from Eversource parent to other Eversource subsidiaries primarily included $115.9 million to Eversource Service and $198.0 million to NSTAR Gas as of December 31, 2017. These intercompany loans from Eversource parent are included in Notes Payable to Eversource Parent and are classified in current liabilities on theirthe respective subsidiary's balance sheets. Intercompany loans from Eversource parent to CL&P, PSNH and WMECO are eliminated in consolidation on Eversource's balance sheets.

We believe the future operating cash flows of Eversource, CL&P, NSTAR Electric and PSNH, along with our existing borrowing availability and access to financial markets for the issuance of new long-term debt, will be sufficient to meet any working capital and future operating requirements, and capital investment forecast opportunities.

Long-Term Debt:The following table summarizes long-term debt issuances and repayments:
(Millions of Dollars)Issue Date Issuances/(Repayments) Maturity Date Use of Proceeds for Issuances/
Repayment Information
CL&P:       
4.00% 2018 Series A First Mortgage BondsMarch 2018 $500.0
 April 2048 Repaid long-term debt that matured in 2018 and repaid short-term borrowings
5.65% 2008 Series A First Mortgage BondsMay 2008 (300.0) May 2018 Repaid at maturity on May 1, 2018
PSNH:       
6.00% 2008 Series O First Mortgage BondsMay 2008 (110.0) May 2018 Repaid at maturity on May 1, 2018
Other:       
Eversource Parent 2.50% Series I Senior Notes (1)
January 2018 200.0
 March 2021 Repaid long-term debt that matured in 2018 and repaid short-term borrowings
Eversource Parent 3.30% Series M Senior NotesJanuary 2018 450.0
 January 2028 Repaid long-term debt that matured in 2018
Eversource Parent 1.60% Series G Senior NotesJanuary 2015 (150.0) January 2018 Repaid at maturity on January 15, 2018
Eversource Parent 1.45% Series E Senior NotesMay 2013 (300.0) May 2018 Repaid at maturity on May 1, 2018
Yankee Gas 4.13% Series O First Mortgage BondsSeptember 2018 50.0
 October 2048 Repaid long-term debt that matured in 2018
NSTAR Gas 4.09% Series P First Mortgage BondsSeptember 2018 100.0
 October 2048 Repaid short-term borrowings
Yankee Gas 6.90% Series J First Mortgage BondsOctober 2018 (100.0) October 2018 Repaid at maturity on October 1, 2018

(1)
These notes are part of the same series issued by Eversource parent in March 2016. The aggregate outstanding principal amount for these notes is now $450 million.



On October 10, 2018, PSNH delivered a redemption notice for its $89.3 million adjustable rate 2001 Series A Pollution Control Revenue Bonds.  The bonds, which are scheduled to mature on May 1, 2021, will be redeemed on November 28, 2018 at a redemption price of $89.3 million.  The bonds are classified as Long-Term Debt on the balance sheet as of September 30, 2018.

As a result of the October 2017 Eversource parent debt issuances in January 2018, $446.8 million of current portion of long-term debt issuances, the net proceeds of which were usedrelated to repay short-term borrowings outstanding under thetwo Eversource parent issuances maturing in 2018 and $201.2 million of commercial paper program, $898.8 million of short-term debt wasborrowings were reclassified to Long-Term Debt as of September 30,December 31, 2017.

NSTAR Electric has a $450 million commercial paper program allowing NSTAR Electric to issue commercial paper as a form of short-term debt. As of September 30, 2017, NSTAR Electric had no short-term borrowings outstanding and as of December 31, 2016, NSTAR Electric had $126.5 million in short-term borrowings outstanding under its commercial paper program, leaving $450.0 million and $323.5 million of available borrowing capacity as of September 30, 2017 and December 31, 2016, respectively.  The weighted-average interest rate on these borrowings as of December 31, 2016 was 0.71 percent.  NSTAR Electric is a party to a five-year $450 million revolving credit facility. The revolving credit facility terminates on September 4, 2021.  The revolving credit facility serves to backstop NSTAR Electric's $450 million commercial paper program.  There were no borrowings outstanding on the revolving credit facility as of September 30, 2017 and December 31, 2016.
7.    RATE REDUCTION BONDS AND VARIABLE INTEREST ENTITIES

Long-Term Debt Issuances:Rate Reduction Bonds: In March 2017, Eversource parentPSNH Funding LLC 3 (PSNH Funding) is a bankruptcy remote, special purpose, wholly-owned subsidiary of PSNH. PSNH Funding was formed solely to issue rate reduction bonds (RRBs) to finance PSNH’s unrecovered stranded costs associated with the divestiture of its generation assets.

On May 8, 2018, PSNH Funding issued $300$635.7 million of 2.75securitized RRBs in multiple tranches with a weighted average interest rate of 3.66 percent, Series K Senior Notes dueand final maturity dates ranging from 2026 to mature in 2022.2035.  The proceeds, netRRBs are expected to be repaid by February 1, 2033. RRB payments consist of issuanceprincipal and interest and will be paid semi-annually, beginning on February 1, 2019. The RRBs were issued pursuant to a finance orderissued by the NHPUC on January 30, 2018 to recover stranded costs resulting from the divestiture of PSNH’s generation assets.

The proceeds were used to repay short-term borrowings under the Eversource parent commercial paper program.

In March 2017, CL&P issued $300 million of 3.20 percent 2017 Series A Firstpurchase PSNH’s stranded cost asset-recovery property, including its vested property right to bill, collect and Refunding Mortgage Bonds due to mature in 2027.adjust a non-bypassable stranded cost recovery charge from PSNH’s retail customers. The proceeds, net of issuance costs, were used to repay short-term borrowings.



In May 2017, NSTAR Electric issued $350 million of 3.20 percent Debentures due to mature in 2027. The proceeds, net of issuance costs, were used to repay short-term borrowings and fund capital expenditures and working capital.

In August 2017, CL&P issued $225 million of 4.30 percent 2014 Series A First and Refunding Mortgage Bonds due to mature in 2044. These bonds are part of the same series of CL&P’s existing 4.30 percent bonds that were initially issued in 2014. The aggregate outstanding principal amount for these bonds is now $475 million. The proceeds, net of issuance costs, were used to refinance short-term debt and fund capital expenditures and working capital.

In September 2017, Yankee Gas issued $75 million of 3.02 percent Series N First Mortgage Bonds due to mature in 2027. The proceeds, net of issuance costs, were used to repay short-term borrowings.

In October 2017, Eversource parent issued $450 million 2.75 percent Series K Senior Notes due to mature in 2022. These senior notes are part of the same series of Eversource parent’s existing 2.75 percent Series K Senior Notes that were initially issued in March 2017. The aggregate outstanding principal amount for the Series K Senior Notes is now $750 million. In addition, Eversource parent issued $450 million of 2.90 percent 2017 Series L Senior Notes due to mature in 2024. The proceeds, net of issuance costs, were used to repay short-term borrowings.

In October 2017, NSTAR Electric issued $350 million of 3.20 percent Debentures due to mature in 2027. The debentures are part of the same series of NSTAR Electric’s existing 3.20 percent Debentures that were initially issued in May 2017. The aggregate outstanding principal amount for the 3.20 percent Debentures is now $700 million. The proceeds, net of issuance costs,collections will be used to redeem long-term debt duepay principal, interest and other costs in connection with the RRBs. The RRBs are secured by the stranded cost asset-recovery property. Cash collections from the stranded cost recovery charges and funds on deposit in trust accounts are the sole source of funds to mature on November 15, 2017. Assatisfy the debt issuance refinanced short-term debt,obligation. PSNH is not the amount was reclassifiedowner of the RRBs, and PSNH Funding’s assets and revenues are not available to Long-Term Debt on Eversource'spay PSNH’s creditors. The RRBs are non-recourse senior secured obligations of PSNH Funding and NSTAR Electric's balance sheets.are not insured or guaranteed by PSNH or Eversource Energy.

Long-Term Debt Repayments:  In March 2017, CL&P repaid at maturityPSNH Funding is considered a variable interest entity (VIE) primarily because the $150 million 5.375 percent 2007 Series A Firstequity capitalization is insufficient to support its operations. PSNH has the power to direct the significant activities of the VIE and Refunding Mortgage Bonds.is most closely associated with the VIE as compared to other interest holders. Therefore, PSNH is considered the primary beneficiary and consolidates PSNH Funding in its consolidated financial statements. The following tables summarize the impact of PSNH Funding on PSNH's balance sheet and income statement:

(Millions of Dollars) 
Balance Sheet:As of September 30, 2018
Restricted Cash - Current Portion (included in Prepayments and Other Current Assets)$26.9
Restricted Cash - Long-Term Portion (included in Other Long-Term Assets)3.2
Securitized Stranded Cost (included in Regulatory Assets)618.6
Other Regulatory Liabilities (included in Regulatory Liabilities)1.0
Accrued Interest (included in Other Current Liabilities)8.8
Rate Reduction Bonds - Current Portion52.3
Rate Reduction Bonds - Long-Term Portion583.3
In September 2017, CL&P repaid at maturity $100 million of 5.75 percent 2007 Series C First Mortgage Bonds and PSNH repaid at maturity $70 million of 6.15 percent 2007 Series N First Mortgage Bonds.
(Millions of Dollars)
Income Statement:
For the Three Months Ended September 30, 2018 For the Nine Months Ended September 30, 2018
Amortization of RRB Principal (included in Amortization of Regulatory Assets, Net)$10.2
 $17.1
Interest Expense on RRB Principal (included in Interest Expense)6.0
 8.8

In October 2017,Variable Interest Entities - Other: The Company's variable interests outside of the consolidated group include contracts that are required by regulation and provide for regulatory recovery of contract costs and benefits through customer rates.  Eversource, CL&P and NSTAR Gas repaid at maturity $25 million of 7.04 percent Series M First Mortgage Bonds.

Long-Term Debt Issuance Authorizations: On January 4, 2017, PURA approvedElectric hold variable interests in VIEs through agreements with certain entities that own single renewable energy or peaking generation power plants, with other independent power producers and with transmission businesses.  Eversource, CL&P's request for authorization&P and NSTAR Electric do not control the activities that are economically significant to issue upthese VIEs or provide financial or other support to $1.325 billion in long-term debt through December 31, 2020. On March 30, 2017, the DPU approvedthese VIEs.  Therefore, Eversource, CL&P and NSTAR Electric's request for authorization to issue up to $700 million in long-term debt through December 31, 2018.Electric do not consolidate these VIEs.

7.8.    PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONSPENSION

Eversource Service sponsors aprovides defined benefit retirement planplans ("Pension Plan"Plans") that coverscover eligible participants.employees, including, among others, employees of CL&P, NSTAR Electric and PSNH.  In addition to the Pension Plan,Plans, Eversource maintains non-qualified defined benefit retirement plans sponsored by Eversource Service ("SERP Plans"), which provide benefits in excess of Internal Revenue Code limitations to eligible participants.participants consisting of current and retired employees. Eversource Service also sponsors aprovides defined benefit postretirement planplans (the "PBOP Plans") that providesprovide life insurance and a health reimbursement arrangement created for the purpose of reimbursing retirees and dependents for health insurance premiums and certain medical expenses to eligible participantsemployees that meetmet certain age and service eligibility requirements ("PBOP Plan").requirements.

In August 2016, the Company amended its PBOP Plan, which standardized separate benefit structures that existed within the plan and made other benefit changes. The remeasurement resulted in a prior service credit of $5.3 million and $16.1 million for the three and nine months ended September 30, 2017, respectively, which was reflected as a reduction to net periodic benefit expense for PBOP benefits. The majority of this amount will be deferred for future refund to customers.


The components of net periodic benefit expense for the Pension, SERP and PBOP Plans are shown below.  The service cost component of net periodic benefit expense and the intercompany allocations, less the capitalized portions, of pension, SERP and PBOP amounts, are included in Operations and Maintenance expense on the statements of income.  The remaining components of net periodic benefit costs for pension, SERP and PBOP are included in Other Income, Net on the statements of income. Capitalized amounts relate to employees working on capital projects and are included in Property, Plant and Equipment, Net on the balance sheets.  Pension, SERP and PBOP expense reflected in the statements of cash flows for CL&P, NSTAR Electric PSNH and WMECOPSNH does not include the intercompany allocations or the corresponding capitalized and deferred portion, as these amounts are cash settled on a short-term basis.
Pension and SERPPension and SERP
EversourceFor the Three Months Ended For the Nine Months Ended
(Millions of Dollars)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Service Cost$17.4
 $18.6
 $53.8
 $56.6
Interest Cost47.2
 46.4
 140.7
 139.2
Expected Return on Pension Plan Assets(83.5) (79.4) (250.5) (238.5)
Actuarial Loss33.9
 31.4
 101.3
 94.2
Prior Service Cost1.2
 0.9
 3.4
 2.6
Total Net Periodic Benefit Expense$16.2
 $17.9
 $48.7
 $54.1
Capitalized Pension Expense$5.5
 $5.4
 $16.5
 $16.8
       For the Three Months Ended September 30, 2018 For the Three Months Ended September 30, 2017
PBOP
EversourceFor the Three Months Ended For the Nine Months Ended
(Millions of Dollars)September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016Eversource CL&P NSTAR Electric PSNH Eversource CL&P NSTAR Electric PSNH
Service Cost$2.4
 $3.0
 $7.1
 $9.2
$20.9
 $5.2
 $4.3
 $2.7
 $17.4
 $4.6
 $3.8
 $2.4
Interest Cost6.8
 7.5
 20.3
 26.5
49.2
 10.5
 10.9
 5.5
 47.2
 10.5
 10.7
 5.3
Expected Return on Plan Assets(16.0) (15.9) (47.8) (47.3)(97.8) (19.4) (26.6) (10.8) (83.5) (17.8) (21.9) (10.0)
Actuarial Loss2.2
 3.0
 6.9
 5.0
35.7
 7.1
 10.1
 3.3
 33.9
 6.8
 10.4
 3.0
Prior Service Credit(5.3) (3.6) (16.1) (3.7)
Total Net Periodic Benefit Income$(9.9) $(6.0) $(29.6) $(10.3)
Capitalized PBOP Income$(4.8) $(2.6) $(14.3) $(4.6)
Prior Service Cost2.0
 0.2
 0.1
 0.1
 1.2
 0.4
 0.2
 0.1
Total Net Periodic Benefit Expense/(Income)$10.0
 $3.6
 $(1.2) $0.8
 $16.2
 $4.5
 $3.2
 $0.8
Intercompany AllocationsN/A
 $1.5
 $1.6
 $0.5
 N/A
 $2.4
 $2.3
 $0.8
Capitalized Pension Expense$6.6
 $2.0
 $1.8
 $0.8
 $5.5
 $2.4
 $2.0
 $0.4
Pension and SERPPension and SERP
For the Three Months Ended September 30, 2017 For the Three Months Ended September 30, 2016For the Nine Months Ended September 30, 2018 For the Nine Months Ended September 30, 2017
(Millions of Dollars)CL&P NSTAR Electric PSNH WMECO CL&P NSTAR Electric PSNH WMECOEversource CL&P NSTAR Electric PSNH Eversource CL&P NSTAR Electric PSNH
Service Cost$4.6
 $3.1
 $2.4
 $0.7
 $4.6
 $3.3
 $2.5
 $0.8
$64.2
 $16.2
 $13.1
 $8.4
 $53.8
 $13.9
 $11.7
 $7.3
Interest Cost10.5
 8.6
 5.3
 2.1
 10.2
 8.5
 5.1
 2.1
147.1
 31.4
 32.6
 16.4
 140.7
 31.3
 31.9
 15.9
Expected Return on Pension Plan Assets(17.8) (17.5) (10.0) (4.4) (18.0) (16.9) (9.6) (4.4)
Expected Return on Plan Assets(293.8) (59.7) (78.3) (32.6) (250.5) (53.9) (65.8) (29.9)
Actuarial Loss6.8
 8.9
 3.0
 1.5
 6.3
 8.7
 2.5
 1.3
107.6
 21.9
 31.0
 9.8
 101.3
 20.7
 30.9
 8.7
Prior Service Cost0.4
 0.1
 0.1
 0.1
 0.4
 
 0.1
 0.1
6.0
 0.8
 0.2
 0.2
 3.4
 1.1
 0.4
 0.4
Total Net Periodic Benefit Expense/(Income)$4.5
 $3.2
 $0.8
 $
 $3.5
 $3.6
 $0.6
 $(0.1)$31.1
 $10.6
 $(1.4) $2.2
 $48.7
 $13.1
 $9.1
 $2.4
Intercompany Allocations$2.4
 $1.8
 $0.8
 $0.5
 $3.5
 $2.2
 $1.0
 $0.6
N/A
 $4.5
 $4.8
 $1.4
 N/A
 $7.4
 $6.9
 $2.5
Capitalized Pension Expense$2.4
 $1.9
 $0.4
 $0.1
 $2.2
 $2.0
 $0.4
 $0.1
$20.2
 $6.2
 $5.8
 $2.3
 $16.5
 $7.3
 $5.7
 $1.1
               
Pension and SERP
For the Nine Months Ended September 30, 2017 For the Nine Months Ended September 30, 2016
(Millions of Dollars)CL&P 
NSTAR
Electric
 PSNH WMECO CL&P 
NSTAR
Electric
 PSNH WMECO
Service Cost$13.9
 $9.4
 $7.3
 $2.3
 $14.3
 $9.9
 $7.5
 $2.4
Interest Cost31.3
 25.6
 15.9
 6.3
 31.2
 25.3
 15.4
 6.3
Expected Return on Pension Plan Assets(53.9) (52.5) (29.9) (13.3) (54.2) (50.7) (28.9) (13.1)
Actuarial Loss20.7
 26.4
 8.7
 4.5
 19.2
 25.8
 7.5
 4.1
Prior Service Cost1.1
 0.2
 0.4
 0.2
 1.1
 
 0.3
 0.2
Total Net Periodic Benefit Expense/(Income)$13.1
 $9.1
 $2.4
 $
 $11.6
 $10.3
 $1.8
 $(0.1)
Intercompany Allocations$7.4
 $5.5
 $2.5
 $1.4
 $10.3
 $6.7
 $3.0
 $1.9
Capitalized Pension Expense$7.3
 $5.4
 $1.1
 $0.3
 $7.1
 $5.7
 $1.0
 $0.3
 PBOP
 For the Three Months Ended September 30, 2018 For the Three Months Ended September 30, 2017
(Millions of Dollars)Eversource CL&P 
NSTAR
Electric
 PSNH Eversource CL&P 
NSTAR
Electric
 PSNH
Service Cost$2.5
 $0.4
 $0.5
 $0.3
 $2.4
 $0.5
 $0.4
 $0.3
Interest Cost7.7
 1.5
 2.2
 0.9
 6.8
 1.3
 2.2
 0.8
Expected Return on Plan Assets(18.2) (2.6) (8.1) (1.5) (16.0) (2.4) (7.2) (1.4)
Actuarial Loss2.6
 0.4
 0.5
 0.2
 2.2
 0.2
 0.9
 0.1
Prior Service Cost/(Credit)(6.0) 0.3
 (4.3) 0.1
 (5.3) 0.3
 (4.3) 0.2
Total Net Periodic Benefit Income$(11.4) $
 $(9.2) $
 $(9.9) $(0.1) $(8.0) $
Intercompany AllocationsN/A
 $(0.3) $(0.3) $(0.1) N/A
 $(0.2) $(0.2) $(0.1)
Capitalized PBOP Expense/(Income)$0.7
 $0.1
 $0.2
 $0.1
 $(4.8) $(0.1) $(4.1) $
 PBOP
 For the Nine Months Ended September 30, 2018 For the Nine Months Ended September 30, 2017
(Millions of Dollars)Eversource CL&P 
NSTAR
Electric
 PSNH Eversource CL&P 
NSTAR
Electric
 PSNH
Service Cost$7.5
 $1.4
 $1.6
 $0.9
 $7.1
 $1.5
 $1.4
 $1.0
Interest Cost23.0
 4.4
 6.5
 2.5
 20.3
 4.0
 6.5
 2.3
Expected Return on Plan Assets(54.2) (7.8) (24.4) (4.5) (47.8) (7.3) (21.6) (4.1)
Actuarial Loss7.7
 1.2
 1.7
 0.6
 6.9
 0.7
 2.6
 0.4
Prior Service Cost/(Credit)(17.6) 0.8
 (12.7) 0.4
 (16.1) 0.8
 (12.8) 0.4
Total Net Periodic Benefit Income$(33.6) $
 $(27.3) $(0.1) $(29.6) $(0.3) $(23.9) $
Intercompany AllocationsN/A
 $(0.8) $(1.0) $(0.3) N/A
 $(0.5) $(0.8) $(0.3)
Capitalized PBOP Expense/(Income)$2.3
 $0.5
 $0.7
 $0.3
 $(14.3) $(0.4) $(12.1) $



 PBOP
 For the Three Months Ended September 30, 2017 For the Three Months Ended September 30, 2016
(Millions of Dollars)CL&P 
NSTAR
Electric
 PSNH WMECO CL&P 
NSTAR
Electric
 PSNH WMECO
Service Cost$0.5
 $0.3
 $0.3
 $0.1
 $0.6
 $0.6
 $0.4
 $0.1
Interest Cost1.3
 1.9
 0.8
 0.3
 1.3
 2.5
 0.7
 0.3
Expected Return on Plan Assets(2.4) (6.6) (1.4) (0.6) (2.5) (6.4) (1.4) (0.6)
Actuarial Loss0.2
 0.9
 0.1
 
 0.5
 1.2
 0.2
 
Prior Service Cost/(Credit)0.3
 (4.3) 0.2
 
 0.2
 (2.9) 0.1
 
Total Net Periodic Benefit (Income)/Expense$(0.1) $(7.8) $
 $(0.2) $0.1
 $(5.0) $
 $(0.2)
Intercompany Allocations$(0.2) $(0.2) $(0.1) $
 $
 $(0.1) $
 $
Capitalized PBOP Income$(0.1) $(4.0) $
 $(0.1) $
 $(2.2) $
 $(0.1)
                
 PBOP
 For the Nine Months Ended September 30, 2017 For the Nine Months Ended September 30, 2016
(Millions of Dollars)CL&P 
NSTAR
Electric
 PSNH WMECO CL&P NSTAR Electric PSNH WMECO
Service Cost$1.5
 $1.1
 $1.0
 $0.3
 $1.4
 $2.5
 $0.9
 $0.3
Interest Cost4.0
 5.7
 2.3
 0.8
 4.0
 10.3
 2.2
 0.8
Expected Return on Plan Assets(7.3) (19.9) (4.1) (1.7) (7.6) (19.2) (4.2) (1.7)
Actuarial Loss0.7
 2.6
 0.4
 
 0.9
 1.7
 0.5
 
Prior Service Cost/(Credit)0.8
 (12.9) 0.4
 0.1
 0.2
 (2.9) 0.1
 
Total Net Periodic Benefit Income$(0.3) $(23.4) $
 $(0.5) $(1.1) $(7.6) $(0.5) $(0.6)
Intercompany Allocations$(0.5) $(0.7) $(0.3) $(0.1) $0.3
 $
 $
 $
Capitalized PBOP Income$(0.4) $(11.9) $
 $(0.2) $(0.5) $(3.3) $
 $(0.3)

8.9.    COMMITMENTS AND CONTINGENCIES

A.    Environmental Matters
Eversource, CL&P, NSTAR Electric PSNH and WMECOPSNH are subject to environmental laws and regulations intended to mitigate or remove the effect of past operations and improve or maintain the quality of the environment.  These laws and regulations require the removal or the remedy of the effect on the environment of the disposal or release of certain specified hazardous substances at current and former operating sites. Eversource, CL&P, NSTAR Electric PSNH and WMECOPSNH have an active environmental auditing and training program and each believes it is substantially in compliance with all enacted laws and regulations.

The number of environmental sites and related reserves for which remediation or long-term monitoring, preliminary site work or site assessment is being performed are as follows:
As of September 30, 2017 As of December 31, 2016As of September 30, 2018 As of December 31, 2017
Number of Sites 
Reserve
(in millions)
 Number of Sites 
Reserve
(in millions)
Number of Sites 
Reserve
(in millions)
 Number of Sites 
Reserve
(in millions)
Eversource58
 $57.7
 61
 $65.8
60
 $66.6
 59
 $54.9
CL&P14
 4.9
 14
 4.9
14
 5.0
 14
 4.7
NSTAR Electric10
 2.0
 13
 3.2
17
 10.9
 15
 2.7
PSNH11
 5.7
 11
 5.3
9
 5.5
 10
 5.7
WMECO4
 0.8
 4
 0.6

The increase in the reserve balance was due primarily to the addition of an environmental site at NSTAR Electric and changes in cost estimates at certain MGP sites under investigation for which additional remediation will be required.

Included in the Eversource number of sites and reserve amounts above are former MGP sites that were operated several decades ago and manufactured gas from coal and other processes, which resulted in certain by-products remaining in the environment that may pose a potential risk to human health and the environment, for which Eversource may have potential liability.  The reserve balances related to these former MGP sites were $51.9$52.3 million and $59.0$49.0 million as of September 30, 20172018 and December 31, 2016,2017, respectively, and related primarily to the natural gas business segment. The reduction in the reserve balance at the MGP sites in the first quarter of 2017 was primarily due to a change in cost estimates at one site where actual contamination was less than originally estimated.

These reserve estimates are subjective in nature as they take into consideration several different remediation options at each specific site.  The reliability and precision of these estimates can be affected by several factors, including new information concerning either the level of contamination at the site, the extent of Eversource's, CL&P's, NSTAR Electric's PSNH's, and WMECO'sPSNH's responsibility for remediation or the extent of remediation required, recently enacted laws and regulations, or changes in cost estimates due to certain economic factors.  It is possible that new information or future developments could require a reassessment of the potential exposure to relatedrequired environmental matters.remediation.  As this information becomes available, management will continue to assess the potential exposure and adjust the reserves accordingly.



B.    Guarantees and Indemnifications
In the normal course of business, Eversource parent provides credit assurances on behalf of its subsidiaries, including CL&P, NSTAR Electric PSNH and WMECO,PSNH, in the form of guarantees.

Eversource parent issued a guaranty on behalf of its subsidiary, NPT, under which, beginning at the time the Northern Pass Transmission line goes into commercial operation, Eversource parent will guarantee the financial obligations of NPT under the TSA with HQ in an amount not to exceed $25 million.  Eversource parent's obligations under the guaranty expire upon the full, final and indefeasible payment of the guaranteed obligations. Eversource parent has also entered into a guaranty on behalf of NPT under which Eversource parent will guarantee NPT's obligations under a facility with a financial institution pursuant to which NPT may request letters of credit in an aggregate amount of up to approximately $14 million.

Eversource parent has also guaranteed certain indemnification and other obligations as a result of the sales of former unregulated subsidiaries and the termination of an unregulated business, with maximum exposures either not specified or not material.  



Management does not anticipate a material impact to net income or cash flows as a result of these various guarantees and indemnifications.  
The following table summarizes Eversource parent's exposure to guarantees and indemnifications of its subsidiaries to external parties, as of September 30, 2017:2018:  
Company Description 
Maximum
 Exposure
(in millions)
 Expiration Dates Description 
Maximum
 Exposure
(in millions)
 Expiration Dates
On behalf of subsidiaries:            
Eversource Gas Transmission LLC 
Access Northeast Project Capital Contributions
   Guaranty (1)
 $185.1
 2021 
Access Northeast Project Capital Contributions
   Guaranty (1)
 $184.9
 2021
Various 
Surety Bonds (2)
 40.1
 2017 - 2018 
Surety Bonds (2)
 42.7
 2018 - 2019
Eversource Service and Rocky River Realty Company Lease Payments for Vehicles and Real Estate 8.2
 2019 - 2024 Lease Payments for Vehicles and Real Estate 6.6
 2019 - 2024

(1) 
Eversource parent issued a declining balance guaranty on behalf of its subsidiary, Eversource Gas Transmission LLC, to guarantee the payment of the subsidiary's capital contributions for its investment in the Access Northeast project. The guaranty decreases as capital contributions are made. The guaranty will expire upon the earlier of the full performance of the guaranteed obligations or December 31, 2021.

(2) 
Surety bond expiration dates reflect termination dates, the majority of which will be renewed or extended.  Certain surety bonds contain credit ratings triggers that would require Eversource parent to post collateral in the event that the unsecured debt credit ratings of Eversource parent are downgraded.  

C.     Spent Nuclear Fuel Obligations - Yankee Companies
CL&P, NSTAR Electric PSNH and WMECOPSNH have plant closure and fuel storage cost obligations to the Yankee Companies, which have each completed the physical decommissioning of their respective nuclear facilities and are now engaged in the long-term storage of their spent fuel. The Yankee Companies collect these costs through wholesale, FERC-approved rates charged under power purchase agreements with several New England utilities, including CL&P, NSTAR Electric PSNH and WMECO.PSNH. These companies in turn recover these costs from their customers through state regulatory commission-approved retail rates. The Yankee Companies have collected or are currently collecting amounts that management believes are adequate to recover the remaining plant closure and fuel storage cost estimates for the respective plants. Management believes CL&P and NSTAR Electric and WMECO will recover their shares of these obligations from their customers. PSNH has recovered its total share of these costs from its customers.

Spent Nuclear Fuel Litigation:
The Yankee Companies have filed complaints against the DOE in the Court of Federal Claims seeking monetary damages resulting from the DOE's failure to provide for a permanent facility to store spent nuclear fuel pursuant to the terms of the 1983 spent fuel and high level waste disposal contracts between the Yankee Companies and the DOE. The court had previously awarded the Yankee Companies damages for Phase I, II and III of litigation resulting from the DOE's failure to meet its contractual obligations. These Phases covered damages incurred in the years 1998 through 2012, and the awarded damages have been received by the Yankee Companies with certain amounts of the damages refunded to their customers.

DOE Phase IV Damages - - On May 22, 2017, each of the Yankee Companies filed subsequent lawsuits against the DOE in the Court of Federal
Claims seeking monetary damages totaling approximately $100 million for CYAPC, YAEC and MYAPC, resulting from the DOE's failure to begin accepting spent nuclear fuel for disposal covering the years from 2013 to 2016 (“DOE Phase IV”). The DOE Phase IV trial is now expected to begin in 2018.

For further discussion, see Part I, Item 3, “Legal Proceedings - Yankee Companies v. U.S. Department of Energy” of our 2016 Form 10-K.


early 2019.

D.    FERC ROE Complaints
Four separate complaints have been filed at the FERC by combinations of New England state attorneys general, state regulatory commissions, consumer advocates, consumer groups, municipal parties and other parties (collectively the "Complainants"). In each of the first three complaints, the Complainants challenged the NETOs' base ROE of 11.14 percent that had been utilized since 2005 and sought an order to reduce it prospectively from the date of the final FERC order and for the separate 15-month complaint periods. In the fourth complaint, filed April 29, 2016, the Complainants challenged the NETOs' base ROE of 10.57 percent and the maximum ROE for transmission incentive ("incentive cap") of 11.74 percent, asserting that these ROEs were unjust and unreasonable.

A summary of the four separate complaints and the base ROEs pertinent to those complaints were as follows:
Complaint 
15-Month Time Period
of Complaint
(Beginning as of Complaint Filing Date)
 
Original Base ROE Authorized by FERC at Time of Complaint
Filing Date (1)
 
Base ROE Subsequently Authorized by FERC for
First Complaint Period and also Effective from October 16, 2014 through April 14, 2017 (1)
 
Reserve
(Pre-Tax and
Excluding Interest)
as of September 30, 2018
(in millions)
First 10/1/2011 - 12/31/2012 11.14% 10.57% $—
(2) 
Second 12/27/2012 - 3/26/2014 11.14% N/A 39.1
(3) 
Third 7/31/2014 - 10/30/2015 11.14% 10.57%  
Fourth 4/29/2016 - 7/28/2017 10.57% 10.57%  



(1)
The ROE billed during the period October 1, 2011 through October 15, 2014 consisted of a base ROE of 11.14 percent and incentives up to 13.1 percent. On October 16, 2014, the FERC set the base ROE at 10.57 percent and an incentive cap at 11.74 percent for the first complaint period. This was also effective for all prospective billings to customers beginning October 16, 2014. This FERC order was vacated on April 14, 2017.

(2)
All amounts associated with the first complaint period have been refunded, which totaled $38.9 million (pre-tax and excluding interest) at Eversource and reflected both the base ROE and incentive cap prescribed by the FERC order. The refund consisted of $22.4 million for CL&P, $13.7 million for NSTAR Electric and $2.8 million for PSNH.

(3)
The reserve represents the difference between the billed rates during the second complaint period and a 10.57 percent base ROE and 11.74 percent incentive cap. The reserve consisted of $21.4 million for CL&P, $14.6 million for NSTAR Electric and $3.1 million for PSNH as of September 30, 2018.

In response to appeals of the October 16, 2014 FERC decision in the first complaint filed by the NETOs and the Complainants, the U.S. Court of Appeals for the D.C. Circuit (the "Court") issued a decision on April 14, 2017 vacating and remanding the FERC's decision. The Court found that the FERC failed to make an explicit finding that the 11.14 percent base ROE was unjust and unreasonable, as required under Section 206 of the Federal Power Act, before it set a new base ROE. The Court also found that the FERC did not provide a rational connection between the record evidence and its decision to select the midpoint of the upper half of the zone of reasonableness for the new base ROE.

On May 26, 2017, the Chief Administrative Law Judge ("ALJ")October 16, 2018, FERC issued an order on all four complaints describing how it intends to address the issues that were remanded by the fourth complaint will continueCourt. FERC proposed a new framework to trialdetermine (1) whether an existing ROE is unjust and unreasonable and, if so, (2) how to calculate a replacement ROE. The parties to these proceedings were directed to submit briefs on this new proposed framework and how they would apply them in December 2017 with an ALJ initial decision expected in March of 2018.

A summaryeach of the four separate complaintscomplaint proceedings. Briefs and reply briefs will be filed in the base ROEs pertinent to those complaints are as follows:
Complaint
15-Month Time Period
of Complaint
(Beginning as of Complaint Filing Date)
Original Base ROE Authorized by FERC at Time of Complaint
Filing Date (1)
Base ROE Subsequently Authorized by FERC for First Complaint Period and also Effective from
October 16, 2014 through April 14, 2017 (1)
Reserve
(Pre-Tax and Excluding Interest) as of September 30, 2017
(in millions)
 
FERC ALJ Recommendation of Base ROE on Second and
Third Complaints
(Issued March 22, 2016)
First10/1/2011 - 12/31/201211.14%10.57%$—
(2) 
N/A
Second12/27/2012 - 3/26/201411.14%N/A39.1
(3) 
9.59%
Third7/31/2014 - 10/30/201511.14%10.57% 10.90%
Fourth4/29/2016 - 7/28/201710.57%10.57% N/A
first quarter of 2019.

(1)The billed ROE (base plus incentives) between October 1, 2011 and October 15, 2014 was within a range of 11.14 percent to 13.1 percent. On October 16, 2014,FERC order included illustrative calculations for the FERC set the incentive cap at 11.74 percentfirst complaint, using FERC's proposed frameworks with financial data from that complaint. Those preliminary calculations indicated that for the first complaint period, and also effective from October 16, 2014 through April 14, 2017, the date on which the Court vacated this FERC order.
(2) CL&P, NSTAR Electric, PSNH and WMECO have refunded all amounts associated with the first complaint period, totaling $38.9 million (pre-tax and excluding interest) at Eversource (consisting of $22.4 million at CL&P, $8.4 million at NSTAR Electric, $2.8 million at PSNH, and $5.3 million at WMECO), reflecting both the base ROE and incentive cap prescribed by the FERC order.

(3) The reserve represents the difference between the ROEs billed during the second complaint period and a 10.57 percent base ROE and 11.74 percent incentive cap. The reserve consisted of $21.4 million for CL&P, $8.5 million for NSTAR Electric, $3.1 million for PSNH, and $6.1 million for WMECO as of September 30, 2017.

On June 5, 2017, the NETOs including Eversource, submittedthat FERC concludes are of average financial risk, (1) a filingpreliminary range of presumptively just and reasonable base ROEs is 9.60 percent to 10.99 percent; (2) the FERC to reinstate thepre-existing base ROE of 11.14 percent with an associatedis therefore unjust and unreasonable; (3) the preliminary just and reasonable base ROE is 10.41 percent; and (4) the preliminary incentive cap on total ROE is 13.08 percent. If the results of 13.5 percent effective June 8, 2017, as these illustrative calculations were the last ROEs lawfullyincluded in effect for transmission billing purposes prior to thea final FERC order, vacated bythen the Court on April 14, 2017. On October 6, 2017, the FERC did not accept the NETOs filing, temporarily leaving in place the ROEs (10.5710.41 percent base ROE with an 11.74and a 13.08 percent incentive cap ROE) set inwould not have a significant impact on our financial statements for the first complaint proceeding until the FERC addresses the Court’s decision.period.

On October 5, 2017Although the NETOs filedorder provided illustrative calculations, FERC stated that these calculations are merely preliminary. The FERC’s preliminary calculations are not binding and do not represent what we believe to be the most likely outcome of a seriesfinal FERC order, as significant changes to the methodology by FERC are possible as a result of motions, requesting that the FERC dismiss the four complaint proceedings. Alternatively, if the FERC does not dismiss the proceedings, the NETOs requested that the FERC consolidate all four complaint proceedings for expeditious resolution and/or stay the trialparties’ arguments and calculations in the fourth complaint proceedingbriefing process. Until FERC issues a final decision on each of these four complaints, there is significant uncertainty, and resolve it based on the standards set in the April 14, 2017 Court decision.

Atat this time, the Company cannot reasonably estimate a range of gain or loss for any of the four complaint proceedings. The April 14, 2017 Court decision didOctober 16, 2018 FERC order does not provide a reasonable basis for a change to the reserve balance of $39.1 million (pre-tax, excluding interest) for the second complaint period, and the Company has not changed its reserve or recognized ROEs for any of the complaint periods.

Management cannot at this time predict the ultimate effect of the Court decision or future FERC action on any of the complaint periods or the estimated impacts on the financial position, results of operations or cash flows of Eversource, CL&P, NSTAR Electric and PSNH or WMECO.currently record revenues at the 10.57 percent base ROE and incentive cap at 11.74 percent established in the October 16, 2014 FERC order.

The average impact of a 10 basis point change to the base ROE for each of the 15-month complaint periods would affect Eversource's after-tax earnings by approximately $3 million.



E.    Eversource and NSTAR Electric Boston Harbor Civil Action
On July 15, 2016, the United States Attorney on behalf of the United States Army Corps of Engineers filed a civil action in the United States District Court for the District of Massachusetts under provisions of the Rivers and Harbors Act of 1899 and the Clean Water Act against NSTAR Electric, Harbor Electric Energy Company, a wholly-owned subsidiary of NSTAR Electric ("HEEC"),HEEC, and the Massachusetts Water Resources Authority (together with NSTAR Electric and HEEC, the "Defendants").  The action alleged that the Defendants failed to comply with certain permitting requirements related to the placement of the HEEC-owned electric distribution cable beneath Boston Harbor.  The action sought an order to compel HEEC to comply with cable depth requirements in the United States Army Corps of Engineers' permit or alternatively to remove the electric distribution cable and cease unauthorized work in U.S. waterways.  The action also sought civil penalties and other costs.

After substantial negotiations, theThe parties reached a settlement wherebypursuant to which HEEC willagreed to install a new 115kV distribution cable across Boston Harbor to Deer Island, utilizing a different route, and will remove portions of the existing cable. Upon the installation and completion of the new cable and the removal of the portions of the existing cable, all issues surrounding the current permit from the United States Army Corps of Engineers are expected to be resolved, and such litigation is expected to be dismissed with prejudice.

In 2017, as a result of the settlement, NSTAR Electric expensed $4.9 million (pre-tax) of previously incurred capitalized costs associated with engineering work performed on the existing cable that will no longer be used. In addition, NSTAR Electric agreed to provide a rate base credit of $17.5 million to the Massachusetts Water Resources Authority for the new cable. This negotiated credit will resultresulted in the initial $17.5 million of construction costs on the new cable to bebeing expensed as incurred.incurred, all of which were fully expensed by June 30, 2018. Construction of the new cable is underway and is expected to be completed in 2019.


9.    PSNH GENERATION ASSET
10.    ASSETS HELD FOR SALE

OnIn June 10, 2015, Eversource and PSNH entered into the 2015 Public Service Company of New Hampshire Restructuring and Rate Stabilization Agreement, (the "Agreement") with the New Hampshire Office of Energy and Planning, certain members of the NHPUC staff, the Office of Consumer Advocate, two State Senators, and several other parties.  Under the terms of the Agreement,pursuant to which PSNH agreed to divest its generation assets, subject to NHPUC approval.  The Agreement provided for a resolution of issues pertaining to PSNH's generation assets in pending regulatory proceedings before the NHPUC.  The Agreement provided for the Clean Air Project prudence proceeding to be resolved and all remaining Clean Air Project costs to be included in rates effective January 1, 2016.  As part of the Agreement, PSNH agreed to forego recovery of $25 million of the equity return related to the Clean Air Project.  

On July 1, 2016, the NHPUC approved the Agreement in an order that, among other things, instructed PSNH to begin the process of divesting its generation assets.  The NHPUC selected an auction adviser to assist with the divestiture, andthis agreement as well as the final divestiture plan and auction process were approved byin the NHPUC in Novembersecond half of 2016.

As of September 30, 2017, PSNH's generation assets were as follows:
(Millions of Dollars) 
Gross Plant$1,184.1
Accumulated Depreciation(573.3)
Net Plant610.8
Fuel92.9
Materials and Supplies44.0
Emission Allowances19.4
Total Generation Assets$767.1

On October 11, 2017, PSNH entered into two Purchase and Sale Agreements ("Agreements")with private investors, one to sell its thermal generation assets at a purchase price of $175 million, subject to adjustment, (the “Thermal Agreement”) and a second to sell its hydroelectric generation assets to private investors at a purchase pricesprice of $175 million and $83 million, respectively, subject to adjustments as set forthadjustment (the “Hydro Agreement”). The NHPUC approved these agreements in each Agreement.
On October 12,late November 2017, PSNH filed an application withat which time the NHPUC requesting approval of the Agreements. We expect to receive approvals from the NHPUC and other necessary regulatory agencies by late December 2017 or early 2018, with the transactions to be completed shortly thereafter. The Company will classifyclassified these assets as held for sale.

On January 10, 2018, PSNH completed the sale upon NHPUC approvalof its thermal generation assets pursuant to the Thermal Agreement. In accordance with the Thermal Agreement, the original purchase price of $175 million was adjusted to reflect working capital adjustments, closing date adjustments and proration of taxes and fees prior to closing, totaling $40.9 million, resulting in net proceeds of $134.1 million. In the second quarter of 2018, the purchase price was further adjusted by $17.3 million relating to the valuation of certain allowances. As a result of these adjustments, net proceeds from the sale of the sale.thermal assets totaled $116.8 million.

Upon completion, full recoveryOn July 16, 2018, FERC issued its order approving the transfer of PSNH's six hydroelectric licenses to private investors. On August 26, 2018, PSNH completed the sale of its hydroelectric generation assets will occur throughpursuant to the Hydro Agreement. In accordance with the Hydro Agreement, the original purchase price of $83 million was adjusted to reflect contractual adjustments totaling $5.7 million, resulting in net proceeds of $77.3 million. The difference between the carrying value of the hydroelectric generation assets and the sale proceeds resulted in a combinationgain of cash flows during$17.2 million. An estimated gain from the remaining operating period, sales proceeds, and recoverysale of these assets was included as an offset to the total stranded costs viaassociated with the sale of generation assets.

On May 8, 2018, PSNH Funding issued $635.7 million of securitized RRBs to finance PSNH's unrecovered stranded costs associated with the divestiture of its generation assets, which included the deferred costs resulting from the sale of the thermal generation assets. These bonds that will beare secured by a non-bypassable charge or through recoveries in future rates billed to PSNH's customers. As of September 30, 2018, unamortized securitized stranded costs totaled $618.6 million and are included in Regulatory Assets on the Eversource and PSNH balance sheets. As of December 31, 2017, the deferred costs resulting from the thermal generation asset sale of $516.1 million represented the difference between the carrying value and the fair value less cost to sell the thermal generation assets. For further information on the securitized RRB issuance, see Note 7, "Rate Reduction Bonds and Variable Interest Entities."

For the three and nine months ended September 30, 2018, pre-tax income associated with the hydroelectric assets prior to the sale on August 26, 2018, was $0.7 million and $9.9 million, respectively. For the three and nine months ended September 30, 2017, pre-tax income associated with PSNH's generation assets was $14.6 million and $44.7 million, respectively.

As of September 30, 2018, all generation assets had been sold and as a result, no generation assets were classified as held for sale. As of December 31, 2017, PSNH's generation assets held for sale, which were included in current assets on the Eversource and PSNH balance sheets, and were part of the Electric Distribution reportable segment, were as follows:
(Millions of Dollars)As of December 31, 2017
Thermal Gross Plant$1,091.4
Hydroelectric Gross Plant83.0
Accumulated Depreciation(575.4)
Net Plant599.0
Fuel and Inventory87.7
Materials and Supplies27.3
Emissions Allowances19.1
Other Assets2.6
Deferred Costs from Thermal Generation Asset Sale(516.1)
Total Generation Assets Held for Sale$219.6



10.11.    FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each of the following financial instruments:

Preferred Stock, Long-Term Debt and Long-Term Debt:Rate Reduction Bonds:  The fair value of CL&P's and NSTAR Electric's preferred stock is based upon pricing models that incorporate interest rates and other market factors, valuations or trades of similar securities and cash flow projections.  The fair value of long-term debt and RRB debt securities is based upon pricing models that incorporate quoted market prices for those issues or similar issues adjusted for market conditions, credit ratings of the respective companies and treasury benchmark yields.  The fair values provided in the tablestable below are classified as Level 2 within the fair value hierarchy.  Carrying amounts and estimated fair values are as follows:
 As of September 30, 2017 As of December 31, 2016
Eversource
(Millions of Dollars)
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Preferred Stock Not Subject to Mandatory Redemption$155.6
 $160.3
 $155.6
 $158.3
Long-Term Debt11,425.9
 11,968.1
 9,603.2
 9,980.5
CL&P NSTAR Electric PSNH WMECOEversource CL&P NSTAR Electric PSNH
(Millions of Dollars)
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
As of September 30, 2017:               
As of September 30, 2018:               
Preferred Stock Not Subject to Mandatory Redemption$116.2
 $115.9
 $43.0
 $44.4
 $
 $
 $
 $
$155.6
 $163.0
 $116.2
 $120.2
 $43.0
 $42.8
 $
 $
Long-Term Debt3,058.9
 3,388.8
 2,426.2
 2,598.1
 1,002.6
 1,047.0
 566.2
 603.7
12,538.8
 12,517.4
 3,253.6
 3,420.4
 2,944.6
 2,990.0
 894.1
 904.3
Rate Reduction Bonds635.7
 631.3
 
 
 
 
 635.7
 631.3
                              
As of December 31, 2016:               
As of December 31, 2017:               
Preferred Stock Not Subject to Mandatory Redemption$116.2
 $114.7
 $43.0
 $43.6
 $
 $
 $
 $
$155.6
 $160.8
 $116.2
 $116.5
 $43.0
 $44.3
 $
 $
Long-Term Debt2,766.0
 3,049.6
 2,078.1
 2,201.6
 1,072.0
 1,109.7
 566.5
 589.0
12,325.5
 12,877.1
 3,059.1
 3,430.5
 2,943.8
 3,156.5
 1,002.4
 1,038.2

Derivative Instruments and Marketable Securities: Derivative instruments and investments in marketable securities are carried at fair value.  For further information, see Note 4, "Derivative Instruments," and Note 5, "Marketable Securities," to the financial statements.  

See Note 1D,1F, "Summary of Significant Accounting Policies - Fair Value Measurements," for the fair value measurement policy and the fair value hierarchy.

11.12.    ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

The changes in accumulated other comprehensive income/(loss) by component, net of tax, is as follows:
For the Nine Months Ended September 30, 2017 For the Nine Months Ended September 30, 2016
Qualified Unrealized     Qualified Unrealized    
Cash Flow Gains     Cash Flow Gains/(Losses)    For the Nine Months Ended September 30, 2018 For the Nine Months Ended September 30, 2017
Eversource
(Millions of Dollars)
Hedging on Marketable Defined   Hedging on Marketable Defined  
Qualified
Cash Flow
Hedging
Instruments
 
Unrealized
Losses on
Marketable
Securities
 
Defined
Benefit Plans
 Total 
Qualified
Cash Flow
Hedging
Instruments
 
Unrealized
Gains on
Marketable
Securities
 
Defined
Benefit Plans
 Total
Instruments Securities Benefit Plans  Total Instruments Securities Benefit Plans  Total
Balance as of Beginning of Period$(8.2) $0.4
 $(57.5) $(65.3) $(10.3) $(1.9) $(54.6) $(66.8)$(6.2) $
 $(60.2) $(66.4) $(8.2) $0.4
 $(57.5) $(65.3)
                              
OCI Before Reclassifications
 0.7
 (3.5) (2.8) 
 2.3
 (5.3) (3.0)
 (0.7) 2.6
 1.9
 
 0.7
 (3.5) (2.8)
Amounts Reclassified from AOCL1.6
 
 2.9
 4.5
 1.6
 
 2.6
 4.2
Amounts Reclassified from AOCI1.6
 
 3.3
 4.9
 1.6
 
 2.9
 4.5
Net OCI1.6
 0.7
 (0.6) 1.7
 1.6
 2.3
 (2.7) 1.2
1.6
 (0.7) 5.9
 6.8
 1.6
 0.7
 (0.6) 1.7
Balance as of End of Period$(6.6) $1.1
 $(58.1) $(63.6) $(8.7) $0.4
 $(57.3) $(65.6)$(4.6) $(0.7) $(54.3) $(59.6) $(6.6) $1.1
 $(58.1) $(63.6)

Eversource's qualified cash flow hedging instruments represent interest rate swap agreements on debt issuances that were settled in prior years. The settlement amount was recorded in AOCLAOCI and is being amortized into Net Income over the term of the underlying debt instrument.  CL&P, PSNHNSTAR Electric and WMECOPSNH continue to amortize interest rate swaps settled in prior years from AOCLAOCI into Interest Expense over the remaining life of the associated long-term debt. Such interest rate swaps are not material to their respective financial statements.

Defined benefit plan OCI amounts before reclassifications relate to actuarial gains and losses and prior service costs that arose during the year and were recognized in AOCL.AOCI. The unamortized actuarial gains and losses and prior service costs on the defined benefit plans are amortized from AOCLAOCI into Operations and Maintenance expenseOther Income, Net over the average future employee service period, and are reflected in amounts reclassified from AOCL.AOCI. For further information, see Note 7,1G, "Summary of Significant Accounting Policies - Other Income, Net," and Note 8, "Pension Benefits and Postretirement Benefits Other Than Pensions.Pension."



12.13.    COMMON SHARES

The following table sets forth the Eversource parent common shares and the shares of common stock of CL&P, NSTAR Electric PSNH and WMECOPSNH that were authorized and issued, as well as the respective per share par values:  
SharesShares
  Authorized as of September 30, 2017 and Issued as of  Authorized as of September 30, 2018 and Issued as of
Par Value December 31, 2016 September 30, 2017 December 31, 2016Par Value December 31, 2017 September 30, 2018 December 31, 2017
Eversource$5
 380,000,000
 333,878,402
 333,878,402
$5
 380,000,000
 333,878,402
 333,878,402
CL&P$10
 24,500,000
 6,035,205
 6,035,205
$10
 24,500,000
 6,035,205
 6,035,205
NSTAR Electric$1
 100,000,000
 100
 100
$1
 100,000,000
 200
 200
PSNH$1
 100,000,000
 301
 301
$1
 100,000,000
 301
 301
WMECO$25
 1,072,471
 434,653
 434,653

As of both September 30, 20172018 and December 31, 2016,2017, there were 16,992,594 Eversource common shares held as treasury shares.  As of both September 30, 20172018 and December 31, 2016,2017, there were 316,885,808 Eversource common shares outstanding were 316,885,808.outstanding.

13.14.    COMMON SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS

Dividends on the preferred stock of CL&P and NSTAR Electric totaled $1.9 million for botheach of the three months ended September 30, 20172018 and 2016,2017 and $5.6 million for botheach of the nine months ended September 30, 20172018 and 2016.2017. These dividends were presented as Net Income Attributable to Noncontrolling Interests on the Eversource statements of income. Noncontrolling Interest – Preferred Stock of Subsidiaries on the Eversource balance sheets totaled $155.6 million as of September 30, 20172018 and December 31, 2016.2017. On the Eversource balance sheets, Common Shareholders' Equity was fully attributable to theEversource parent and Noncontrolling Interest – Preferred Stock of Subsidiaries was fully attributable to the noncontrolling interest.

14.15.    EARNINGS PER SHARE

Basic EPS is computed based upon the weighted average number of common shares outstanding during each period.  Diluted EPS is computed on the basis of the weighted average number of common shares outstanding plus the potential dilutive effect of certain share-based compensation awards as if they were converted into common shares.  The dilutive effect of unvested RSU and performance share awards is calculated using the treasury stock method.  RSU and performance share awards are included in basic weighted average common shares outstanding as of the date that all necessary vesting conditions have been satisfied.  For the three and nine months ended September 30, 2017 and 2016, there were no antidilutive share awards excluded from the computation of diluted EPS.

The following table sets forth the components of basic and diluted EPS:
Eversource
(Millions of Dollars, except share information)
For the Three Months Ended For the Nine Months EndedFor the Three Months Ended For the Nine Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017
Net Income Attributable to Common Shareholders$260.4
 $265.3
 $750.6
 $713.1
$289.4
 $260.4
 $801.7
 $750.6
Weighted Average Common Shares Outstanding:              
Basic317,393,029
 317,787,836
 317,415,848
 317,696,823
317,360,110
 317,393,029
 317,367,252
 317,415,848
Dilutive Effect556,367
 789,243
 591,194
 814,786
607,201
 556,367
 581,246
 591,194
Diluted317,949,396
 318,577,079
 318,007,042
 318,511,609
317,967,311
 317,949,396
 317,948,498
 318,007,042
Basic and Diluted EPS$0.82
 $0.83
 $2.36
 $2.24
Basic EPS$0.91
 $0.82
 $2.53
 $2.36
Diluted EPS$0.91
 $0.82
 $2.52
 $2.36



16.    REVENUES

On January 1, 2018, Eversource, including CL&P, NSTAR Electric and PSNH, adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” using the modified retrospective approach.The core principle of this accounting guidance is that revenue is recognized when promised goods or services (referred to as performance obligations) are transferred to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard uses a five-step model for recognizing and measuring revenue from contracts with customers, which includes identifying the contract with the customer, identifying the performance obligations promised within the contract, determining the transaction price (the amount of consideration to which the company expects to be entitled), allocating the transaction price to the performance obligations and recognizing revenue when (or as) the performance obligation is satisfied.

The following table presents operating revenues disaggregated by revenue source:
 For the Three Months Ended September 30, 2018
Eversource
(Millions of Dollars)
Electric
Distribution
 
Natural Gas
Distribution
 
Electric
Transmission
 Water Distribution Other Eliminations Total
Revenue from Contracts with Customers             
Retail Tariff Sales             
Residential$1,111.7
 $42.8
 $
 $41.2
 $
 $
 $1,195.7
Commercial789.6
 40.8
 
 17.9
 
 (1.2) 847.1
Industrial98.7
 18.9
 
 1.3
 
 (2.6) 116.3
Total Retail Tariff Sales Revenue2,000.0

102.5
 
 60.4


 (3.8) 2,159.1
Wholesale Transmission Revenue
 
 364.5
 
 11.7
 (300.2) 76.0
Wholesale Market Sales Revenue48.8
 11.4
 
 1.3
 
 
 61.5
Other Revenue from Contracts with Customers20.2
 (0.5) 3.1
 1.9
 212.9
 (213.5) 24.1
Reserve for Revenue Subject to Refund5.2
 (3.5) 
 (1.3) 
 
 0.4
Total Revenue from Contracts with Customers2,074.2

109.9
 367.6
 62.3

224.6
 (517.5) 2,321.1
Alternative Revenue Programs(51.6) (1.5) (37.0) 1.1
 
 33.8
 (55.2)
Other Revenue4.8
 0.6
 
 0.1
 
 
 5.5
Total Operating Revenues$2,027.4

$109.0
 $330.6
 $63.5

$224.6
 $(483.7) $2,271.4
 For the Nine Months Ended September 30, 2018
Eversource
(Millions of Dollars)
Electric
Distribution
 
Natural Gas
Distribution
 
Electric
Transmission
 Water Distribution Other Eliminations Total
Revenue from Contracts with Customers             
Retail Tariff Sales             
Residential$2,900.4
 $395.9
 $
 $100.9
 $
 $
 $3,397.2
Commercial2,023.0
 245.4
 
 47.9
 
 (3.4) 2,312.9
Industrial268.6
 71.9
 
 3.4
 
 (7.5) 336.4
Total Retail Tariff Sales Revenue5,192.0
 713.2
 
 152.2
 
 (10.9) 6,046.5
Wholesale Transmission Revenue
 
 988.9
 
 34.4
 (826.9) 196.4
Wholesale Market Sales Revenue141.4
 41.4
 
 3.1
 
 
 185.9
Other Revenue from Contracts with Customers54.4
 (1.4) 9.4
 5.4
 658.1
 (659.8) 66.1
Reserve for Revenue Subject to Refund(21.2) (11.5) 
 (3.3) 
 
 (36.0)
Total Revenue from Contracts with Customers5,366.6
 741.7
 998.3
 157.4
 692.5
 (1,497.6) 6,458.9
Alternative Revenue Programs(57.2) (3.2) (45.3) 3.7
 
 41.5
 (60.5)
Other Revenue12.4
 2.0
 
 0.4
 
 
 14.8
Total Operating Revenues$5,321.8
 $740.5
 $953.0
 $161.5
 $692.5
 $(1,456.1) $6,413.2


 For the Three Months Ended September 30, 2018 For the Nine Months Ended September 30, 2018
(Millions of Dollars)CL&P NSTAR Electric PSNH CL&P NSTAR Electric PSNH
Revenue from Contracts with Customers           
Retail Tariff Sales           
Residential$539.6
 $414.8
 $157.3
 $1,410.0
 $1,071.6
 $418.8
Commercial259.0
 443.8
 87.3
 702.2
 1,083.8
 238.4
Industrial39.4
 38.0
 21.3
 111.8
 96.9
 59.9
Total Retail Tariff Sales Revenue838.0
 896.6
 265.9
 2,224.0
 2,252.3
 717.1
Wholesale Transmission Revenue179.1
 128.3
 57.1
 469.8
 367.7
 151.4
Wholesale Market Sales Revenue13.3
 18.1
 17.4
 34.3
 56.4
 52.3
Other Revenue from Contracts with Customers9.3
 10.3
 4.0
 25.0
 27.9
 11.4
Reserve for Revenue Subject to Refund8.3
 
 (3.1) (8.3) (3.7) (9.2)
Total Revenue from Contracts with Customers1,048.0
 1,053.3
 341.3
 2,744.8
 2,700.6
 923.0
Alternative Revenue Programs(64.3) (15.4) (8.9) (68.4) (15.6) (18.5)
Other Revenue2.8
 1.8
 0.2
 6.5
 5.1
 0.8
Eliminations(121.5) (100.2) (42.4) (338.0) (289.8) (112.6)
Total Operating Revenues$865.0
 $939.5
 $290.2
 $2,344.9
 $2,400.3
 $792.7

Retail Tariff Sales: Regulated utilities provide products and services to their regulated customers under rates, pricing, payment terms and conditions of service, regulated by each state regulatory agency. The arrangement whereby a utility provides commodity service to a customer for a price approved by the respective state regulatory commission is referred to as a tariff sale contract, and the tariff governs all aspects of the provision of regulated services by utilities. The majority of revenue for Eversource, CL&P, NSTAR Electric and PSNH is derived from regulated retail tariff sales for the sale and distribution of electricity, natural gas and water to residential, commercial and industrial retail customers.

The utility's performance obligation for the regulated tariff sales is to provide electricity, natural gas or water to the customer as demanded.
The promise to provide the commodity represents a single performance obligation, as it is a promise to transfer a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. Revenue is recognized over time as the customer simultaneously receives and consumes the benefits provided by the utility, and the utility satisfies its performance obligation. Revenue is recognized based on the output method as there is a directly observable output to the customer (electricity, natural gas or water units delivered to the customer and immediately consumed). Each Eversource utility is entitled to be compensated for performance completed to date (service taken by the customer) until service is terminated.

In regulated tariff sales, the transaction prices are the rates approved by the respective state regulatory commissions.  In general, rates can only be changed through formal proceedings with the state regulatory commissions. These rates are designed to recover the costs to provide service to customers and include a return on investment. Regulatory commission-approved tracking mechanisms are included in these rates and are also used to recover, on a fully-reconciling basis, certain costs, such as the procurement of energy supply, retail transmission charges, energy efficiency program costs, net metering for distributed generation, and restructuring and stranded costs. These tracking mechanisms result in rates being changed periodically to ensure recovery of actual costs incurred.

Customers may elect to purchase electricity from each Eversource electric utility or may contract separately with a competitive third party supplier. Revenue is not recorded for the sale of the electricity commodity to customers who have contracted separately with these suppliers, only the delivery to a customer, as the utility is acting as an agent on behalf of the third party supplier.

Wholesale Transmission Revenues:  The Eversource electric transmission-owning companies (CL&P, NSTAR Electric and PSNH) each own and maintain transmission facilities that are part of an interstate power transmission grid over which electricity is transmitted throughout New England. CL&P, NSTAR Electric and PSNH, as well as most other New England utilities, are parties to a series of agreements that provide for coordinated planning and operation of the region's transmission facilities and the rules by which they acquire transmission services.  The Eversource electric transmission-owning companies have a combination of FERC-approved regional and local formula rates that work in tandem to recover all their transmission costs. These rates are part of the ISO-NE Tariff. Regional rates recover the costs of higher voltage transmission facilities that benefit the region and are collected from all New England transmission customers, including the Eversource distribution businesses. Eversource's local rates recover the companies' total transmission revenue requirements, less revenues received from regional rates and other sources, and are collected from Eversource's distribution businesses and other transmission customers. The distribution businesses of Eversource, in turn, recover the FERC approved charges from retail customers through annual or semiannual tracking mechanisms, which are retail tariff sales.

The utility's performance obligation for regulated wholesale transmission sales is to provide transmission services to the customer as demanded. The promise to provide transmission service represents a single performance obligation. The transaction prices are the transmission rate formulas as defined by the ISO-NE Tariff and are regulated and established by FERC. Wholesale transmission revenue is recognized over time as the performance obligation is completed, which occurs as transmission services are provided to customers. The revenue is recognized based on the output method. Each Eversource utility is entitled to be compensated for performance completed to date (e.g., use of the transmission system by the customer).



Wholesale Market Sales Revenues: Wholesale market sales transactions include sales of energy and energy-related products into the ISO-NE wholesale electricity market, sales of natural gas to third party marketers, and also the sale of RECs to various counterparties. ISO-NE oversees the region's wholesale electricity market and administers the transactions and terms and conditions, including payment terms, which are established in the ISO-NE tariff, between the buyers and sellers in the market. Pricing is set by the wholesale market. The wholesale transactions in the ISO-NE market occur on a day-ahead basis or a real-time basis (daily) and are, therefore, short-term. Transactions are tracked and reported by ISO-NE net by the hour, which is the net hourly position of energy sales and purchases by each market participant. Beginning in the first quarter of 2018, the performance obligation for ISO-NE energy transactions is defined to be the net by hour transaction. Revenue is recognized when the performance obligation for these energy sales transactions is satisfied, when the sale occurs and the energy is transferred to the customer. For sales of natural gas, transportation, and natural gas pipeline capacity to third party marketers, revenue is recognized when the performance obligation is satisfied at the point in time the sale occurs and the natural gas or related product is transferred to the marketer. RECs are sold to various counterparties, and revenue is recognized when the performance obligation is satisfied upon transfer of title to the customer through the New England Power Pool Generation Information System.

Other Revenue from Contracts with Customers: Other revenue from contracts with customers primarily includes property rentals that are not deemed leases. These revenues are generally recognized on a straight-line basis over time as the service is provided to the customer.

Reserve for Revenue Subject to Refund: Current base rates include an estimate of income taxes, which was based on the U.S. federal corporate income tax rate in effect at the time of the rate proceeding. Eversource established a liability, recorded as a reduction to revenue, to reflect the difference between the 35 percent federal corporate income tax rate included in rates charged to customers and the 21 percent federal income tax rate, effective January 1, 2018 as a result of the Tax Cuts and Jobs Act, until rates billed to customers reflect the lower federal tax rate. Eversource expects to refund these amounts to customers through various rate mechanisms in the future, depending on regulatory outcomes, and CL&P began refunding these amounts in the third quarter of 2018.

NSTAR Electric (effective February 1, 2018), CL&P (effective May 1, 2018) and NSTAR Gas (effective July 1, 2018) lowered distribution rates charged to customers to reflect the new federal corporate income tax rate. PSNH will adjust distribution rates to reflect the lower federal income tax rate, effective July 1, 2019, or earlier if a rate case is filed for rates effective prior to July 1, 2019.As part of Yankee Gas' rate case settlement, if approved, distribution rates will be adjusted to reflect the lower federal income tax rate, effective November 15, 2018.

Alternative Revenue Programs: In accordance with accounting guidance for rate-regulated operations, certain of Eversource's utilities' rate making mechanisms qualify as alternative revenue programs ("ARPs") if they meet specified criteria, in which case revenues may be recognized prior to billing based on allowed levels of collection in rates. Eversource's utility companies recognize revenue and record a regulatory asset or liability once the condition or event allowing for the automatic adjustment of future rates occurs. ARP revenues include both the recognition of the deferral adjustment to ARP revenues, when the regulator-specified condition or event allowing for additional billing or refund has occurred, and an equal and offsetting reversal of the ARP deferral to revenues as those amounts are reflected in the price of service in subsequent periods.

Eversource’s ARPs include the revenue decoupling mechanism and the annual reconciliation adjustment to transmission formula rates, described below.

Certain Eversource electric, natural gas and water companies, including CL&P and NSTAR Electric, have revenue decoupling mechanisms approved by a regulatory commission ("decoupled companies"). Decoupled companies’ distribution revenues are not directly based on sales volumes. The decoupled companies reconcile their annual base distribution rate recovery to pre-established levels of baseline distribution delivery service revenues, with any difference between the allowed level of distribution revenue and the actual amount realized adjusted through subsequent rates.

The transmission formula rates provide for the annual reconciliation and recovery or refund of estimated costs to actual costs.  The financial impacts of differences between actual and estimated costs are deferred for future recovery from, or refund to, transmission customers.  This transmission deferral reconciles billed transmission revenues to the revenue requirement for our transmission businesses.

Other Revenues: Other Revenues include certain fees charged to customers and lease revenue that are not considered revenue from contracts with customers.

Intercompany Eliminations: Intercompany eliminations are primarily related to the Eversource electric transmission revenues that are derived from ISO-NE regional transmission charges to the distribution businesses of CL&P, NSTAR Electric and PSNH that recover the costs of the wholesale transmission business, and revenues from Eversource's service company. Intercompany revenues and expenses between the Eversource wholesale transmission businesses and the Eversource distribution businesses and from Eversource's service company are eliminated in consolidation and included in "Eliminations" in the table above.

Receivables: Receivables, Net on the balance sheet include trade receivables from our retail customers and receivables arising from ISO-NE billing related to wholesale transmission contracts and wholesale market transactions, sales of natural gas and capacity to marketers, sales of RECs, and property rentals. In general, retail tariff customers and wholesale transmission customers are billed monthly and the payment terms are generally due and payable upon receipt of the bill.



Unbilled Revenues on the balance sheet represent estimated amounts due from retail customers for electricity, natural gas or water delivered to customers but not yet billed. The utility company has satisfied its performance obligation and the customer has received and consumed the commodity as of the balance sheet date, and therefore, the utility company records revenue for those services in the period the services were provided. Only the passage of time is required before the company is entitled to payment for the satisfaction of the performance obligation. Payment from customers is due monthly as services are rendered and amounts are billed. Actual amounts billed to customers when meter readings become available may vary from the estimated amount.

Unbilled revenues are recognized by allocating estimated unbilled sales volumes to the respective customer classes, and then applying an estimated rate by customer class to those sales volumes. Unbilled revenue estimates reflect seasonality, weather, customer usage patterns, customer rates in effect for customer classes, and the timing of customer billing. The companies that have a decoupling mechanism record a regulatory deferral to reflect the actual allowed amount of revenue associated with their respective decoupled distribution rate design.

Practical Expedients: Eversource has elected practical expedients in the accounting guidance that allow the company to record revenue in the amount that the company has a right to invoice, if that amount corresponds directly with the value to the customer of the company's performance to date, and not to disclose related unsatisfied performance obligations. Retail and wholesale transmission tariff sales fall into this category, as these sales are recognized as revenue in the period the utility provides the service and completes the performance obligation, which is the same as the monthly amount billed to customers. There are no other material revenue streams for which Eversource has unsatisfied performance obligations.

15.17.    SEGMENT INFORMATION

Presentation:  Eversource is organized among the Electric Distribution, Electric Transmission, and Natural Gas Distribution and Water Distribution reportable segments and Other based on a combination of factors, including the characteristics of each segments' services, the sources of operating revenues and expenses and the regulatory environment in which each segment operates.  These reportable segments represent substantially all of Eversource's total consolidated revenues.  Revenues from the sale of electricity, and natural gas and water primarily are derived from residential, commercial and industrial customers and are not dependent on any single customer.  The Electric Distribution reportable segment includes the results of PSNH's generation activitiesfacilities prior to sales in January and August 2018, and NSTAR Electric's solar power facilities. Eversource's reportable segments are determined based upon the level at which Eversource's chief operating decision maker assesses performance and makes decisions about the allocation of NSTAR Electric, PSNH and WMECO.  company resources. On December 4, 2017, Eversource acquired Aquarion, which was considered to be a new operating segment, water distribution. Though the water distribution segment does not meet quantitative thresholds under the segment reporting accounting guidance, based on qualitative factors including the nature of the water distribution business, Water Distribution was deemed a reportable segment beginning in the first quarter of 2018.

The remainder of Eversource's operations is presented as Other in the tables below and primarily consists of 1) the equity in earnings of Eversource parent from its subsidiaries and intercompany interest income, both of which are eliminated in consolidation, and interest expense related to the debt of Eversource parent, 2) the revenues and expenses of Eversource Service, most of which are eliminated in consolidation, 3) the operations of CYAPC and YAEC, and 4) the results of other unregulated subsidiaries, which are not part of its core business. In addition, Other in the tables below includes Eversource parent's equity ownership interests in certain natural gas pipeline projects owned by Enbridge, Inc., the Bay State Wind project, a renewable energy investment fund, and two companies that transmit hydroelectricity imported from the Hydro-Quebec system in Canada. In the ordinary course of business, Yankee Gas and NSTAR Gas purchase natural gas transmission services from the Enbridge, Inc. natural gas pipeline projects described above. These affiliate transaction costs total approximately $62.5 million annually and are classified as Purchased Power, Fuel and Transmission on the Eversource statements of income.


Each of Eversource's subsidiaries, including CL&P, NSTAR Electric and PSNH, has one reportable segment.

Cash flows used for investments in plant included in the segment information below are cash capital expenditures that do not include amounts incurred but not paid, cost of removal, AFUDC related to equity funds, and the capitalized portions of pension and PBOP expense.   

Eversource's reportable segments are determined based upon the level at which Eversource's chief operating decision maker assesses performance and makes decisions about the allocation of company resources.  Each of Eversource's subsidiaries, including CL&P, NSTAR Electric, PSNH and WMECO, has one reportable segment.  Eversource's operating segments and reporting units are consistent with its reportable business segments.

Eversource's segment information is as follows:
For the Three Months Ended September 30, 2017
For the Three Months Ended September 30, 2018 (1)
Eversource
(Millions of Dollars)
Electric
Distribution
 
Natural Gas
Distribution
 
Electric
Transmission
 Other Eliminations Total
Electric
Distribution
 
Natural Gas
Distribution
 
Electric
Transmission
 Water Distribution Other Eliminations Total
Operating Revenues$1,547.1
 $109.2
 $328.5
 $224.2
 $(220.5) $1,988.5
$2,027.4
 $109.0
 $330.6
 $63.5
 $224.6
 $(483.7) $2,271.4
Depreciation and Amortization(159.6) (15.2) (52.6) (9.5) 0.6
 (236.3)(206.1) (13.9) (58.3) (11.7) (12.0) 0.6
 (301.4)
Other Operating Expenses(1,088.7) (95.5) (95.5) (190.0) 220.1
 (1,249.6)(1,562.2) (102.4) (96.7) (25.5) (200.9) 483.7
 (1,504.0)
Operating Income/(Loss)$298.8
 $(1.5) $180.4
 $24.7
 $0.2
 $502.6
$259.1
 $(7.3) $175.6
 $26.3
 $11.7
 $0.6
 $466.0
Interest Expense$(51.3) $(10.8) $(29.2) $(21.8) $4.4
 $(108.7)$(52.4) $(11.3) $(30.3) $(8.5) $(30.5) $7.8
 $(125.2)
Other Income, Net7.7
 0.3
 8.5
 267.5
 (262.8) 21.2
32.2
 1.5
 9.0
 0.7
 251.7
 (278.4) 16.7
Net Income/(Loss) Attributable to
Common Shareholders
157.4
 (6.2) 99.0
 268.4
 (258.2) 260.4
173.8
 (12.6) 109.5
 17.6
 271.1
 (270.0) 289.4
                        
For the Nine Months Ended September 30, 2017
For the Nine Months Ended September 30, 2018 (1)
Eversource
(Millions of Dollars)
Electric Distribution Natural Gas Distribution Electric Transmission Other Eliminations TotalElectric Distribution Natural Gas Distribution Electric Transmission Water Distribution Other Eliminations Total
Operating Revenues$4,224.2
 $698.8
 $970.0
 $677.5
 $(714.0) $5,856.5
$5,321.8
 $740.5
 $953.0
 $161.5
 $692.5
 $(1,456.1) $6,413.2
Depreciation and Amortization(394.9) (54.8) (154.5) (26.7) 1.7
 (629.2)(486.0) (59.6) (171.8) (34.6) (35.9) 1.7
 (786.2)
Other Operating Expenses(3,056.0) (535.2) (280.4) (602.4) 714.0
 (3,760.0)(4,238.6) (585.7) (268.7) (73.9) (617.2) 1,457.0
 (4,327.1)
Operating Income$773.3
 $108.8
 $535.1
 $48.4
 $1.7
 $1,467.3
$597.2
 $95.2
 $512.5
 $53.0
 $39.4
 $2.6
 $1,299.9
Interest Expense$(149.0) $(32.3) $(86.1) $(63.1) $11.0
 $(319.5)$(152.0) $(33.7) $(89.9) $(25.5) $(94.8) $23.2
 $(372.7)
Other Income, Net15.2
 0.8
 20.1
 853.9
 (833.7) 56.3
Other Income/(Loss), Net70.9
 5.1
 26.7
 (0.4) 913.8
 (915.4) 100.7
Net Income Attributable to Common Shareholders393.4
 49.1
 289.6
 839.5
 (821.0) 750.6
379.3
 50.2
 329.6
 26.3
 905.9
 (889.6) 801.7
Cash Flows Used for Investments in Plant752.4
 209.8
 575.6
 104.5
 
 1,642.3
717.4
 245.5
 735.8
 68.1
 118.3
 
 1,885.1
For the Three Months Ended September 30, 2016For the Three Months Ended September 30, 2017
Eversource
(Millions of Dollars)
Electric
Distribution
 
Natural Gas
Distribution
 
Electric
Transmission
 Other Eliminations Total
Electric
Distribution
 
Natural Gas
Distribution
 
Electric
Transmission
 Water Distribution Other Eliminations Total
Operating Revenues$1,623.4
 $99.2
 $306.8
 $211.5
 $(201.2) $2,039.7
$1,547.1
 $109.2
 $328.5
 $
 $224.2
 $(220.5) $1,988.5
Depreciation and Amortization(154.8) (15.2) (47.1) (8.6) 0.5
 (225.2)(159.6) (15.2) (52.6) 
 (9.5) 0.6
 (236.3)
Other Operating Expenses(1,146.8) (87.8) (90.2) (179.3) 199.5
 (1,304.6)(1,095.2) (96.2) (95.5) 
 (190.1) 220.1
 (1,256.9)
Operating Income/(Loss)$321.8
 $(3.8) $169.5
 $23.6
 $(1.2) $509.9
$292.3
 $(2.2) $180.4
 $
 $24.6
 $0.2
 $495.3
Interest Expense$(49.0) $(10.2) $(26.9) $(15.1) $1.3
 $(99.9)$(51.3) $(10.8) $(29.2) $
 $(21.8) $4.4
 $(108.7)
Other Income, Net5.3
 0.6
 6.3
 256.9
 (255.5) 13.6
14.2
 1.0
 8.5
 
 267.6
 (262.8) 28.5
Net Income/(Loss) Attributable to
Common Shareholders
170.1
 (7.0) 88.4
 268.5
 (254.7) 265.3
157.4
 (6.2) 99.0
 
 268.4
 (258.2) 260.4
                        
For the Nine Months Ended September 30, 2016For the Nine Months Ended September 30, 2017
Eversource
(Millions of Dollars)
Electric
Distribution
 
Natural Gas
Distribution
 
Electric
Transmission
 Other Eliminations Total
Electric
Distribution
 
Natural Gas
Distribution
 
Electric
Transmission
 Water Distribution Other Eliminations Total
Operating Revenues$4,362.6
 $622.3
 $892.5
 $636.8
 $(651.7) $5,862.5
$4,224.2
 $698.8
 $970.0
 $
 $677.5
 $(714.0) $5,856.5
Depreciation and Amortization(380.9) (47.9) (137.7) (23.1) 1.6
 (588.0)(394.9) (54.8) (154.5) 
 (26.7) 1.7
 (629.2)
Other Operating Expenses(3,230.1) (462.4) (245.7) (564.7) 650.2
 (3,852.7)(3,076.1) (537.3) (280.6) 
 (602.9) 714.0
 (3,782.9)
Operating Income$751.6
 $112.0
 $509.1
 $49.0
 $0.1
 $1,421.8
$753.2
 $106.7
 $534.9
 $
 $47.9
 $1.7
 $1,444.4
Interest Expense$(144.6) $(30.8) $(82.2) $(45.8) $4.8
 $(298.6)$(149.0) $(32.3) $(86.1) $
 $(63.1) $11.0
 $(319.5)
Other Income, Net11.6
 0.5
 14.2
 781.4
 (784.0) 23.7
35.3
 2.9
 20.3
 
 854.4
 (833.7) 79.2
Net Income Attributable to Common Shareholders381.3
 51.9
 266.6
 791.7
 (778.4) 713.1
393.4
 49.1
 289.6
 
 839.5
 (821.0) 750.6
Cash Flows Used for Investments in Plant570.9
 170.3
 536.2
 81.8
 
 1,359.2
752.4
 209.8
 575.6
 
 104.5
 
 1,642.3



(1)
Effective January 1, 2018, upon implementation of the new revenue accounting guidance, the electric distribution segment is presented gross and intercompany transmission billings are presented in the eliminations column, as Eversource believes that the electric distribution segment acts as a principal, rather than an agent, in its contracts with retail customers. Retail customers contract directly with the electric distribution utility and do not differentiate between distribution and transmission services. Therefore, the electric distribution segment revenues, which are derived from retail customer billings, are presented gross of the eliminations. Prior to 2018, the electric distribution segment presented intercompany electric transmission billings net, based on indicators of net presentation prior to the new revenue guidance.  See Note 16, "Revenues," regarding accounting for revenues.

The following table summarizes Eversource's segmented total assets:
Eversource
(Millions of Dollars)
Electric
Distribution
 
Natural Gas
Distribution
 Electric
Transmission
 Other Eliminations Total
As of September 30, 2017$18,826.0
 $3,432.6
 $9,290.3
 $14,939.4
 $(13,324.7) $33,163.6
As of December 31, 201618,367.5
 3,303.8
 8,751.5
 14,493.1
 (12,862.7) 32,053.2
Eversource
(Millions of Dollars)
Electric
Distribution
 
Natural Gas
Distribution
 Electric
Transmission
 Water Distribution Other Eliminations Total
As of September 30, 2018$21,189.0
 $3,747.4
 $10,077.5
 $2,240.3
 $16,979.4
 $(16,717.9) $37,515.7
As of December 31, 201719,250.4
 3,595.2
 9,401.2
 2,470.0
 15,933.8
 (14,430.2) 36,220.4

18.     ACQUISITION OF AQUARION

On December 4, 2017, Eversource acquired Aquarion for a purchase price of $1.675 billion, consisting of approximately $880 million in cash and $795 million of assumed Aquarion debt. Aquarion is a holding company that owns three separate regulated water utility subsidiaries engaged in the water collection, treatment and distribution business that operate in Connecticut, Massachusetts and New Hampshire. These regulated utilities collect, treat and distribute water to residential, commercial and industrial customers, to other utilities for resale, and for private and municipal fire protection. Aquarion and its subsidiaries became wholly-owned subsidiaries of Eversource, and Eversource's consolidated financial information includes Aquarion and its subsidiaries' activity beginning December 4, 2017. The approximate $880 million cash purchase price included the $745 million equity purchase price plus a $135 million shareholder loan that was repaid at closing.

Purchase Price Allocation: The purchase price allocation reflects a measurement period adjustment recorded in the first quarter of 2018 to revise the fair value of Aquarion's regulated debt. The $7.9 million increase to the fair value of Long-Term Debt (including the current portion) and corresponding increase to Regulatory Assets, included within Other Noncurrent Assets, excluding Goodwill in the table below, will be amortized over the life of the related debt. The allocation of the cash purchase price is as follows:
(Millions of Dollars) 
Current Assets$41.2
PP&E1,034.9
Goodwill907.9
Other Noncurrent Assets, excluding Goodwill215.5
Current Liabilities(121.9)
Noncurrent Liabilities(421.6)
Long-Term Debt(778.3)
Total Cash Purchase Price$877.7


EVERSOURCE ENERGY AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related combined notes included in this combined Quarterly Report on Form 10-Q, the combined quarterly reportsQuarterly Report on Form 10-Q for the quarters ended March 31, 20172018 and June 30, 2017,2018, as well as the Eversource 20162017 Form 10-K.  References in this combined Quarterly Report on Form 10-Q to "Eversource," the "Company," "we," "us," and "our" refer to Eversource Energy and its consolidated subsidiaries.  All per-share amounts are reported on a diluted basis.  The unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P and WMECO are herein collectively referred to as the "financial statements."  

Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations.  

The only common equity securities that are publicly traded are common shares of Eversource.  The earnings and EPS of each business discussed below do not represent a direct legal interest in the assets and liabilities of such business but rather represent a direct interest in our assets and liabilities as a whole.  EPS by business is a financial measure not recognized under GAAP calculated by dividing the Net Income Attributable to Common Shareholders of each business by the weighted average diluted Eversource common shares outstanding for the period.  We use this non-GAAP financial measure to evaluate and provide details of earnings results by business.  We believe that the non-GAAP presentation is a meaningful representativerepresentation of our financial performance and provides additional and useful information to readers of this report in analyzing historical and future performance by business.  This non-GAAP financial measure should not be considered as an alternative to reported Net Income Attributable to Common Shareholders or EPS determined in accordance with GAAP as an indicator of operating performance.

From time to time, we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, assumptions of future events, future financial performance or growth and other statements that are not historical facts.  These statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  You can generally identify our forward-looking statements through the use of words or phrases such as "estimate," "expect," "anticipate," "intend," "plan," "project," "believe," "forecast," "should," "could," and other similar expressions.  Forward-looking statements are based on the current expectations, estimates, assumptions or projections of management and are not guarantees of future performance.  These expectations, estimates, assumptions or projections may vary materially from actual results.  Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause our actual results to differ materially from those contained in our forward-looking statements, including, but not limited to:

cybercyberattacks or breaches, including those resulting in the compromise of the confidentiality of our proprietary information and the personal information of our customers,
acts of war or terrorism, physical attacks or grid disturbances that may damage and disrupt our transmission and distribution systems,
ability or inability to commence and complete our major strategic development projects and opportunities,
actions or inaction of local, state and federal regulatory, public policy and taxing bodies,
substandard performance of third-party suppliers and service providers,
fluctuations in weather patterns, including extreme weather due to climate change,
changes in business conditions, which could include disruptive technology related to our current or future business model,
increased conservation measures of customers and development of alternative energy sources,
contamination of, or disruption in, our water supplies,
changes in economic conditions, including impact on interest rates, tax policies, and customer demand and payment ability,
fluctuations in weather patterns,
changes in laws, regulations or regulatory policy,
changes in levels or timing of capital expenditures,
disruptions in the capital markets or other events that make our access to necessary capital more difficult or costly,
developmentschanges in legallaws, regulations or publicregulatory policy, doctrines,
technological developments,including compliance with environmental laws and regulations,
changes in accounting standards and financial reporting regulations,
actions of rating agencies, and
other presently unknown or unforeseen factors.  

Other risk factors are detailed in our reports filed with the SEC and updated as necessary, and we encourage you to consult such disclosures.

All such factors are difficult to predict and contain uncertainties that may materially affect our actual results, many of which are beyond our control.  You should not place undue reliance on the forward-looking statements, as each speaks only as of the date on which such statement is made, and, except as required by federal securities laws, we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.  New factors emerge from time to time and it is not possible for us to predict all of such factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. For more information, see Item 1A, Risk Factors, included in this combined Quarterly Report on Form 10-Q and in Eversource's 20162017 combined Annual Report on Form 10-K.  This combined Quarterly Report on Form 10-Q and Eversource's 20162017 combined Annual Report on Form 10-K also describe material contingencies and critical accounting policies in the accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations and Combined Notes to Financial Statements.  We encourage you to review these items.


Financial Condition and Business Analysis

Executive Summary

The following items in this executive summary are explained in more detail in this combined Quarterly Report on Form 10-Q:

Results:Earnings Overview:  

We earned $289.4 million, or $0.91 per share, in the third quarter of 2018, and $801.7 million, or $2.52 per share, in the first nine months of 2018, compared with $260.4 million, or $0.82 per share, in the third quarter of 2017, and $750.6 million, or $2.36 per share, in the first nine months of 2017, compared with $265.32017.  

Our electric distribution segment earned $173.8 million, or $0.83$0.55 per share, in the third quarter of 2016,2018, and $713.1$379.3 million, or $2.24$1.19 per share, in the first nine months of 2016.  

Our electric distribution segment, which includes generation, earned2018, compared with $157.4 million, or $0.50 per share, in the third quarter of 2017, and $393.4 million, or $1.24 per share, in the first nine months of 2017, compared with $170.12017.  Our electric transmission segment earned $109.5 million, or $0.53$0.34 per share, in the third quarter of 2016,2018, and $381.3$329.6 million, or $1.20$1.04 per share, in the first nine months of 2016.  

Our electric transmission segment earned2018, compared with $99.0 million, or $0.31 per share, in the third quarter of 2017, and $289.6 million, or $0.91 per share, in the first nine months of 2017, compared with $88.42017.  Our natural gas distribution segment had a net loss of $12.6 million, or $0.28$0.04 per share, in the third quarter of 2016,2018, and $266.6earnings of $50.2 million, or $0.84$0.16 per share, in the first nine months of 2016.  

Our natural gas distribution segment had2018, compared with a net loss of $6.2 million, or $0.02 per share, in the third quarter of 2017, and earnings of $49.1 million, or $0.15 per share, in the first nine months of 2017, compared with a net loss of $7.02017.  Our water distribution segment earned $17.6 million, or $0.02$0.06 per share in the third quarter of 2016,2018, and earnings of $51.9$26.3 million, or $0.16$0.08 per share, in the first nine months of 2016.  2018.

Eversource parent and other companies earned $1.1 million in the third quarter of 2018 and $16.3 million, or $0.05 per share, in the first nine months of 2018, compared with $10.2 million, or $0.03 per share, in the third quarter of 2017 and $18.5 million, or $0.06 per share, in the first nine months of 2017, compared with $13.8 million in the third quarter of 2016 and $13.3 million in the first nine months of 2016.2017.  

Liquidity:

Cash flows provided by operating activities totaled $1.49$1.41 billion in the first nine months of 2017,2018, compared with $1.65$1.48 billion in the first nine months of 2016.2017.  Investments in property, plant and equipment totaled $1.89 billion in the first nine months of 2018, compared with $1.64 billion in the first nine months of 2017, compared with $1.36 billion in the first nine months of 2016.2017.  Cash and cash equivalents totaled $125.8$59.1 million as of September 30, 2017,2018, compared with $30.3$38.2 million as of December 31, 2016.2017.

In 2017,the third quarter of 2018, we issued $2.5 billion$150 million of new long-term debt, consisting of $1.2 billion by Eversource parent, $700$50 million by NSTAR Electric, $525Yankee Gas and $100 million by CL&P, and $75 million by YankeeNSTAR Gas. Proceeds from these new issuances were used primarily to payrepay short-term borrowings and redeemrepay long-term debt at maturity.

On September 6, 2017,10, 2018, our Board of Trustees approved a common share dividend payment of $0.475$0.505 per share, which was paid on September 29, 201728, 2018, to shareholders of record as of September 19, 2017.
21, 2018.

Strategic, Legislative, Regulatory, Policy and Other Items:

On October 6, 2017, the16, 2018, FERC issued an order on all four complaints describing how it intends to address the issues that did not acceptwere remanded by the NETOs June 5, 2017 filingU.S. Court of Appeals for the D.C. Circuit. FERC proposed a new framework to reinstatedetermine (1) whether an existing ROE is unjust and unreasonable and, if so, (2) how to calculate a replacement ROE. The parties to these proceedings were directed to submit briefs on this new proposed framework and how they would apply them in each of the base ROEfour complaint proceedings. Briefs and reply briefs will be filed in the first quarter of 11.14 percent with an associated ROE incentive cap of 13.5 percent. Therefore, the Company will continue to recognize transmission revenues as billed utilizing a base ROE of 10.57 percent with an incentive cap of 11.74 percent.2019.

On October 12, 2017, PSNH filedIn the third quarter of 2018, we recorded an application with the NHPUC requesting approval of the sale of PSNH's thermal and hydroelectric power generation assets in New Hampshire to private investors for a combined purchase price totaling $258 million.

On October 29, 2017, a storm delivered high winds and rain, causing extensive damageother-than-temporary impairment charge to our electric distribution systems across all three states.  We estimate that more than 800,000investment in the Access Northeast project of $32.9 million pre-tax ($26 million after-tax), representing the full carrying value of our electric distribution customers were without power during or following the storm.  Restoration costs cannot be estimated at this time.equity method investment. As a result of certain non-Eversource natural gas related events in eastern Massachusetts in September 2018 that resulted in widespread damage, compounded by the extentfailure to secure Massachusetts legislation to date, we believe there is significant uncertainty around the future timing of, and ability to secure, needed legislative changes affecting the natural gas industry and pipeline expansion, which may significantly delay the completion of the damages, we expect the storm restoration costs will be material and will exceed the criteria to be declared a major storm in Connecticut, New Hampshire, and Massachusetts and, as a result, we do not expect the storm to have a material impact on our results of operations.Access Northeast project.


On August 26, 2018, PSNH completed the sale of its hydroelectric generation assets. In accordance with the Purchase and Sale Agreement dated October 11, 2017, the original purchase price of $83 million was adjusted to reflect contractual adjustments totaling $5.7 million, resulting in net proceeds of $77.3 million. As of August 26, 2018, PSNH no longer owns any generation facilities.




Earnings Overview

Consolidated:  Below is a summary of our earnings by business, which also reconciles the non-GAAP financial measure of EPS by business to the most directly comparable GAAP measure of diluted EPS, for the third quarter and the first nine months of 20172018 and 2016.2017.  
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
(Millions of Dollars, Except Per-Share Amounts)Amount Per Share Amount Per Share Amount Per Share Amount Per Share
Net Income Attributable to
Common Shareholders (GAAP)
$260.4
 $0.82
 $265.3
 $0.83
 $750.6
 $2.36
 $713.1
 $2.24
Regulated Companies$250.2
 $0.79
 $251.5
 $0.79
 $732.1
 $2.30
 $699.8
 $2.20
Eversource Parent and Other Companies10.2
 0.03
 13.8
 0.04
 18.5
 0.06
 13.3
 0.04
Net Income Attributable to Common Shareholders (GAAP)$260.4
 $0.82
 $265.3

$0.83
 $750.6
 $2.36
 $713.1
 $2.24
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2018 2017 2018 2017
(Millions of Dollars, Except Per Share Amounts)Amount Per Share Amount Per Share Amount Per Share Amount Per Share
Net Income Attributable to
   Common Shareholders (GAAP)
$289.4
 $0.91
 $260.4
 $0.82
 $801.7
 $2.52
 $750.6
 $2.36
Regulated Companies$288.3
 $0.91
 $250.2
 $0.79
 $785.4
 $2.47
 $732.1
 $2.30
Eversource Parent and Other Companies1.1
 
 10.2
 0.03
 16.3
 0.05
 18.5
 0.06
Net Income Attributable to Common
   Shareholders (GAAP)
$289.4
 $0.91
 $260.4

$0.82
 $801.7
 $2.52
 $750.6
 $2.36

Regulated Companies:  Our Regulatedregulated companies consist ofcomprise the electric distribution (including NSTAR Electric's solar power facilities and PSNH's generation facilities prior to sale), electric transmission, and natural gas distribution segments. Generation activities of PSNH and WMECO are included in our electricwater distribution segment.segments. A summary of our segment earnings and EPS for the third quarter and the first nine months of 2017 and 2016 is as follows: 
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 20162018 2017 2018 2017
(Millions of Dollars, Except Per-Share Amounts)Amount Per Share Amount Per Share Amount Per Share Amount Per Share
(Millions of Dollars, Except Per Share Amounts)Amount Per Share Amount Per Share Amount Per Share Amount Per Share
Electric Distribution$157.4
 $0.50
 $170.1
 $0.53
 $393.4
 $1.24
 $381.3
 $1.20
$173.8
 $0.55
 $157.4
 $0.50
 $379.3
 $1.19
 $393.4
 $1.24
Electric Transmission99.0
 0.31
 88.4
 0.28
 289.6
 0.91
 266.6
 0.84
109.5
 0.34
 99.0
 0.31
 329.6
 1.04
 289.6
 0.91
Natural Gas Distribution(6.2) (0.02) (7.0) (0.02) 49.1
 0.15
 51.9
 0.16
(12.6) (0.04) (6.2) (0.02) 50.2
 0.16
 49.1
 0.15
Water Distribution17.6
 0.06
 N/A
 N/A
 26.3
 0.08
 N/A
 N/A
Net Income - Regulated Companies$250.2
 $0.79
 $251.5
 $0.79
 $732.1
 $2.30
 $699.8
 $2.20
$288.3
 $0.91
 $250.2
 $0.79
 $785.4
 $2.47
 $732.1
 $2.30

Our electric distribution segment earnings increased $16.4 million in the third quarter of 2018, as compared to the third quarter of 2017, due primarily to the impact of the CL&P base distribution rate increase effective May 1, 2018, the recognition of carrying charges on PSNH storm costs approved for recovery, higher sales volumes at PSNH, higher non-service income from our benefit plans, and a gain on the sale of property at PSNH. Earnings were also favorably impacted by lower income tax expense, net of lower distribution revenues resulting from the Tax Cuts and Jobs Act. The earnings increase was partially offset by higher operations and maintenance expense, lower generation earnings at PSNH due to the sale of its thermal and hydroelectric generation assets in 2018, higher depreciation expense and higher property and other tax expense.

Our electric distribution segment earnings decreased $12.7 million in the third quarter of 2017, as compared to the third quarter of 2016, due primarily to lower sales volumes and demand revenues driven by the mild summer weather during the third quarter of 2017, primarily at NSTAR Electric, as well as higher property tax, depreciation and interest expense.

Our electric distribution segment earnings increased $12.1$14.1 million in the first nine months of 2017,2018, as compared to the first nine months of 2016,2017, due primarily to lower generation earnings at PSNH due to the sales of its thermal and hydroelectric generation assets in 2018, higher operations and maintenance expense, higher depreciation expense and higher property and other tax expense. The earnings decrease was partially offset by higher non-service income from our benefit plans, the impact of the CL&P base distribution rate increase effective May 1, 2018, the recognition of carrying charges on PSNH storm costs approved for recovery, and a gain on the sale of property at PSNH. Earnings were also favorably impacted by lower sales volumes driven byincome tax expense, net of lower distribution revenues resulting from the mild summer weather during the third quarter of 2017, primarily at NSTAR Electric, higher depreciationTax Cuts and interest expense, and lower generation earnings.Jobs Act.

Our electric transmission segment earnings increased $10.6$10.5 million and $23.0$40.0 million in the third quarter and first nine months of 2017,2018, respectively, as compared to the third quarter and first nine months of 2016,2017, due primarily to a higher transmission rate base as a result of our continued investment in our transmission infrastructure, partially offset by a lower benefit in the second quarter of 2017 related to the annual billing and cost reconciliation filing with the FERC.infrastructure.

Our natural gas distribution segment results improved $0.8earnings decreased $6.4 million in the third quarter of 2017,2018, as compared to the third quarter of 2016,2017, due primarily to higher operations and maintenance expense.

Our natural gas distribution segment earnings decreased $2.8increased $1.1 million in the first nine months of 2017,2018, as compared to the first nine months of 2016. The decrease in the first nine months of 2017, was due primarily to higher depreciation expense,an increase in sales volumes and demand revenues driven by colder January and April weather in Connecticut in 2018, as compared to the same periods in 2017, as well as growth in new customer base, partially offset by higher operations and maintenance expense and lower demand revenues in Connecticut driven by lower peak usage in 2017, as compared to 2016, as a resulthigher depreciation expense.

Our third quarter and first nine months of milder winter weather.2018 water distribution segment results reflect the earnings of the Aquarion water distribution business, which was acquired on December 4, 2017.



Eversource Parent and Other Companies:  Eversource parent and other companies earnedhad earnings of $1.1 million in the third quarter of 2018 and $16.3 million in the first nine months of 2018, compared with $10.2 million in the third quarter of 2017 and $18.5 million in the first nine months of 2017, compared with $13.82017.  The decrease in earnings in both periods was due primarily to a pre-tax $32.9 million ($26 million after-tax) other-than-temporary impairment to our equity method investment in the third quarter of 2016Access Northeast project and $13.3higher interest expense, partially offset by a lower effective tax rate due primarily to an $18 million aggregate after-tax benefit resulting from both federal and Connecticut tax law changes. Earnings in the first nine months of 2016.  The improved year-to-date results were largely due toalso favorably impacted by increased unrealized gains on investments recordedour investment in 2017, partially offset by higher interest expense.a renewable energy fund and an income tax benefit associated with our investments. For further information on the impairment of our Access Northeast project, see "Business Development and Capital Expenditures - Natural Gas Transmission Business" in this Management's Discussion and Analysis of Financial Condition and Results of Operations.

Electric, and Natural Gas and Water Sales Volumes:  Weather, fluctuations in energy supply costs, conservation measures (including utility-sponsored energy efficiency programs), and economic conditions affect customer energy usage.usage and water consumption.  Industrial sales volumes are less sensitive to temperature variations than residential and commercial sales volumes.  In our service territories, weather impacts both electric and water sales volumes during the summer and both electric and natural gas sales volumes during the winter; however, natural gas sales volumes are more sensitive to temperature variations than are electric sales volumes.  Customer heating or cooling usage may not directly correlate with historical levels or with the level of degree-days that occur.



Fluctuations in retail electric sales volumes at NSTAR ElectricPSNH and PSNHnatural gas sales volumes at Yankee Gas impact earnings ("Traditional" in the table below).  For CL&P, NSTAR Electric (effective February 1, 2018, as a result of the DPU-approved rate case decision) and WMECO,NSTAR Gas, fluctuations in retail electric sales volumes do not impact earnings due to their respective regulatory commission approvedcommission-approved distribution revenue decoupling mechanisms ("Decoupled" in the table below).  These distribution revenues are decoupled from their customer sales volumes, which breaks the relationship between sales volumes and revenues recognized.  CL&P and WMECO reconcile their annual base distribution rate recovery amounts to their respective pre-established levels of baseline distribution delivery service revenues of $1.059 billion and $132.4 million, respectively.  Any difference between the allowed level of distribution revenue and the actual amount incurred during a 12-month period is adjusted through rates in the following period.

Fluctuations in natural gaswater sales volumes in Connecticut impact earnings ("Traditional" in the table below). In Massachusetts, fluctuations in natural gas sales volumeslargely do not impact earnings due to theas our Connecticut water distribution business is decoupled.

A 2016 DPU-approved natural gas distribution revenue decoupling mechanism approvedenergy efficiency plan at NSTAR Electric authorized recovery of LBR in its eastern Massachusetts service territory until LBR was covered under a decoupled rate structure, which occurred on February 1, 2018. NSTAR Electric recognized LBR of $7.0 million in the last rate case decision ("Decoupled"first nine months of 2018, compared to $18.8 million and $54.7 million in the table below).  These distribution revenues are decoupled from their customer sales volumes, which breaks the relationship between sales volumesthird quarter and revenues recognized.first nine months of 2017, and no longer has an LBR mechanism effective February 1, 2018.

A summary of our retail electric GWh sales volumes, and our firm natural gas MMcf sales volumes, as well asand our water MG sales volumes, and percentage changes, for the three and nine months ended September 30, 2018, as compared to 2017, is as follows:  
 For the Three Months Ended September 30, 2017 Compared to 2016 For the Nine Months Ended September 30, 2017 Compared to 2016
 Sales Volumes (GWh) Percentage Sales Volumes (GWh) Percentage
Electric2017 2016 Decrease 2017 2016 Decrease
Traditional:           
Residential2,583
 2,910
 (11.2)% 7,126
 7,407
 (3.8)%
Commercial4,291
 4,525
 (5.2)% 12,058
 12,376
 (2.6)%
Industrial671
 696
 (3.6)% 1,856
 1,948
 (4.7)%
Total – Traditional7,545
 8,131
 (7.2)% 21,040
 21,731
 (3.2)%
            
Decoupled:           
Residential2,972
 3,398
 (12.5)% 8,334
 8,750
 (4.8)%
Commercial2,849
 3,039
 (6.3)% 8,003
 8,315
 (3.8)%
Industrial730
 776
 (5.9)% 2,054
 2,170
 (5.3)%
Total – Decoupled6,551
 7,213
 (9.2)% 18,391
 19,235
 (4.4)%
Total Sales Volumes14,096
 15,344
 (8.1)% 39,431
 40,966
 (3.7)%

 Electric Firm Natural Gas Water
 Sales Volumes (GWh) Percentage
Increase
 Sales Volumes (MMcf) Percentage
Increase/
(Decrease)
 Sales Volumes (MG) Percentage
Increase/
(Decrease)
 2018 
2017 (1)
  2018 2017  2018 
2017 (2)
 
Three Months Ended September 30:                 
Traditional2,206
 2,020
 9.2% 5,984
 5,550
 7.8 %��732
 706
 3.7 %
Decoupled13,110
 12,076
 8.6% 4,674
 4,828
 (3.2)% 7,118
 7,257
 (1.9)%
Special Contracts (3)
N/A
 N/A
 N/A
 684
 1,147
 (40.4)% N/A
 N/A
 N/A
Total - Decoupled and
Special Contracts
13,110
 12,076
 8.6% 5,358
 5,975
 (10.3)% 7,118
 7,257
 (1.9)%
Total Sales Volumes15,316
 14,096
 8.7% 11,342
 11,525
 (1.6)% 7,850
 7,963
 (1.4)%
 For the Three Months Ended September 30, 2017 Compared to 2016 For the Nine Months Ended September 30, 2017 Compared to 2016
 Sales Volumes (MMcf) Percentage Sales Volumes (MMcf) Percentage
Firm Natural Gas2017 2016 Increase/(Decrease) 2017 2016 Increase/(Decrease)
Traditional:           
Residential1,036
 956
 8.4 % 10,138
 10,109
 0.3 %
Commercial2,482
 2,350
 5.6 % 14,432
 13,864
 4.1 %
Industrial2,032
 1,964
 3.5 % 7,663
 7,597
 0.9 %
Total – Traditional5,550
 5,270
 5.3 % 32,233
 31,570
 2.1 %
            
Decoupled:           
Residential1,244
 1,308
 (4.9)% 14,593
 13,848
 5.4 %
Commercial2,314
 2,147
 7.8 % 15,072
 15,019
 0.4 %
Industrial1,270
 990
 28.3 % 4,293
 4,163
 3.1 %
Total – Decoupled4,828
 4,445
 8.6 % 33,958
 33,030
 2.8 %
Special Contracts (1)
1,147
 1,208
 (5.0)% 3,495
 3,507
 (0.3)%
Total – Decoupled and Special Contracts5,975
 5,653
 5.7 % 37,453
 36,537
 2.5 %
Total Sales Volumes11,525
 10,923
 5.5 % 69,686
 68,107
 2.3 %
Nine Months Ended September 30:                 
Traditional7,857
 7,542
 4.2% 35,745
 32,233
 10.9 % 1,684
 1,608
 4.7 %
Decoupled32,814
 31,889
 2.9% 35,358
 33,958
 4.1 % 16,491
 17,084
 (3.5)%
Special Contracts (3)
N/A
 N/A
 N/A
 2,222
 3,495
 (36.4)% N/A
 N/A
 N/A
Total - Decoupled and
Special Contracts
32,814
 31,889
 2.9% 37,580
 37,453
 0.3 % 16,491
 17,084
 (3.5)%
Total Sales Volumes40,671
 39,431
 3.1% 73,325
 69,686
 5.2 % 18,175
 18,692
 (2.8)%

(1)
In 2017 and in the month of January 2018, NSTAR Electric operated under two different rate structures (traditional and decoupled) based on its service territory geography. Effective February 1, 2018, NSTAR Electric operated entirely under a decoupled rate structure. The 2017 sales volumes for NSTAR Electric have been recast to present February through September 2017 as decoupled, to conform to the 2018 presentation for comparative purposes.

(2)
Eversource acquired its water distribution business on December 4, 2017. Prior year sales volumes have been presented for comparative purposes.

(3) 
Special contracts are unique to theYankee Gas natural gas distribution customers who take service under such an arrangement and generally specify the amount of distribution revenue to be paid to Yankee Gas regardless of the customers' usage.

For

Traditional retail electric sales volumes were higher in the third quarter andof 2018, as compared to the third quarter of 2017, due primarily to warmer summer weather in 2018. Traditional retail electric sales volumes were higher in the first nine months of 2018, as compared to the first nine months of 2017, retail electric sales volumes at our electric utilities with a traditional rate structure (NSTAR Electric and PSNH) were lower, as compareddue primarily to the third quarter and first nine months of 2016. Sales volumes were negatively impacted by the mildwarmer summer weather in the third quarter of 2017, as compared2018 and colder weather in January 2018 at NSTAR Electric (prior to the same period in 2016, and lower customer usage driven by the impact of increased customer energy conservation efforts.its decoupled rate structure). Cooling degree days for the first nine months of 2017 were 17.8 percent lower in the Boston metropolitan area and 24.8 percent lower in New Hampshire, as compared to the same period in 2016.



On January 28, 2016, Eversource received approval of a three-year energy efficiency plan in Massachusetts, which includes recovery of LBR at NSTAR Electric until it is operating under a decoupled rate structure.  NSTAR Electric earns LBR related to reductions in sales volume as a result of successful energy efficiency programs.  LBR is recovered from retail customers through current rates.  NSTAR Electric recognized LBR of $18.8 million and $54.7 million in the third quarter and first nine months of 2017,2018 were 50.3 percent and 28.3 percent higher in New Hampshire, respectively, as compared to $17.4 million and $44.1 millionthe same periods in 2017. Heating degree days in January of 2018 were 21.7 percent higher in the third quarter and first nine months of 2016, respectively.Boston metropolitan, as compared to January 2017.

Our firm natural gas sales volumes are subject to many of the same influences as our retail electric sales volumes. In addition, they have benefited from customer growth in both of our natural gas distribution companies.  Consolidatedsegment.  Traditional firm natural gas sales volumes were higher in the first nine months of 2017,2018, as compared to the first nine months of 2016,2017, due primarily to improved economic conditions across our service territories, partially offset by increased customer energy conservation efforts. The first quarter of 2017 mild winter weather was more than offset by colder than normalJanuary and April weather in the second quarter of 2017.2018. Heating degree days forin the first nine months of 20172018 were 2.24.1 percent higher in Connecticut, as compared to the same period in 2016.

Major Storm: On October 29, 2017, a storm delivered high winds and rain, causing extensive damage to our electric distribution systems across all three states.  We estimate that more than 800,000first nine months of our electric distribution customers were without power during or following the storm. Restoration costs cannot be estimated at this time. As a result of the extent of the damages, we expect the storm restoration costs will be material and will exceed the criteria to be declared a major storm in Connecticut, New Hampshire, and Massachusetts and that each operating company will seek recovery of these costs through its applicable regulatory recovery process.  As a result, all qualifying expenses prudently incurred during the storm will be deferred and recovered from customers.  We do not expect the storm to have a material impact to the results of operations of CL&P, NSTAR Electric, PSNH or WMECO.2017.

Liquidity

Consolidated:  Cash and cash equivalents totaled $125.8$59.1 million as of September 30, 2017,2018, compared with $30.3$38.2 million as of December 31, 2016.

Long-Term Debt Issuances: In August 2017, CL&P issued $225 million of 4.30 percent 2014 Series A First and Refunding Mortgage Bonds due to mature in 2044. These bonds are part of the same series of CL&P’s existing 4.30 percent bonds that were initially issued in 2014. The aggregate outstanding principal amount for these bonds is now $475 million. The proceeds, net of issuance costs, were used to refinance short-term debt and fund capital expenditures and working capital.

In September 2017, Yankee Gas issued $75 million of 3.02 percent Series N First Mortgage Bonds due to mature in 2027. The proceeds, net of issuance costs, were used to repay short-term borrowings.

In October 2017, Eversource parent issued $450 million 2.75 percent Series K Senior Notes due to mature in 2022. These senior notes are part of the same series of Eversource parent’s existing 2.75 percent Series K Senior Notes that were initially issued in March 2017. The aggregate outstanding principal amount for the Series K Senior Notes is now $750 million. In addition, Eversource parent issued $450 million of 2.90 percent 2017 Series L Senior Notes due to mature in 2024. The proceeds, net of issuance costs, were used to repay short-term borrowings.

In October 2017, NSTAR Electric issued $350 million of 3.20 percent Debentures due to mature in 2027. The debentures are part of the same series of NSTAR Electric’s existing 3.20 percent Debentures that were initially issued in May 2017. The aggregate outstanding principal amount for the 3.20 percent Debentures is now $700 million. The proceeds, net of issuance costs, will be used to redeem long-term debt due to mature on November 15, 2017.

Long-TermShort-Term Debt Repayments:  In September 2017, CL&P repaid at maturity $100 million of 5.75 percent 2007 Series C First Mortgage Bonds and PSNH repaid at maturity $70 million of 6.15 percent 2007 Series N First Mortgage Bonds.

In October 2017, NSTAR Gas repaid at maturity $25 million of 7.04 percent Series M First Mortgage Bonds.

- Commercial Paper Programs and Credit Agreements: Eversource parent has a $1.45 billion commercial paper program allowing Eversource parent to issue commercial paper as a form of short-term debt.  As of September 30, 2017 and December 31, 2016, Eversource parent had $917.0 million and approximately $1.0 billion, respectively, in short-term borrowings outstanding under the Eversource parent commercial paper program, leaving $533.0 million and $428.0 million of available borrowing capacity as of September 30, 2017 and December 31, 2016, respectively. The weighted-average interest rate on these borrowings as of September 30, 2017 and December 31, 2016 was 1.34 percent and 0.88 percent, respectively. As of September 30, 2017, there were intercompany loans from Eversource parent of $202.3 million to PSNH, and $96.9 million to WMECO.  As of December 31, 2016, there were intercompany loans from Eversource parent of $80.1 million to CL&P, $160.9 million to PSNH and $51.0 million to WMECO.  Eversource parent, CL&P, PSNH, WMECO, NSTAR Gas and Yankee Gas are also parties to a five-year $1.45 billion revolving credit facility. The revolving credit facility terminates on September 4, 2021.  The revolving credit facilityDecember 8, 2022 and serves to backstop Eversource parent's $1.45 billion commercial paper program.  

NSTAR Electric has a $650 million commercial paper program allowing NSTAR Electric to issue commercial paper as a form of short-term debt. NSTAR Electric is also a party to a five-year $650 million revolving credit facility. The revolving credit facility terminates on December 8, 2022 and serves to backstop NSTAR Electric's $650 million commercial paper program.  

There were no borrowings outstanding on either the Eversource parent or NSTAR Electric revolving credit facilityfacilities as of September 30, 2017 and2018 or December 31, 2016.2017. Eversource's water distribution segment has a $100 million revolving credit facility, which expires on August 19, 2019, and there were no amounts outstanding as of September 30, 2018 and $76.0 million outstanding as of December 31, 2017.

ExceptThe amount of borrowings outstanding and available under the commercial paper programs were as described below, amountsfollows:
 Borrowings Outstanding as of Available Borrowing Capacity as of Weighted-Average Interest Rate as of
 September 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017
(Millions of Dollars)     
Eversource Parent Commercial Paper Program$826.7
 $979.3
 $623.3
 $470.7
 2.34% 1.86%
NSTAR Electric Commercial Paper Program240.5
 234.0
 409.5
 416.0
 2.17% 1.55%

Amounts outstanding under the commercial paper programs and revolving credit facility are included in Notes Payable for Eversource and NSTAR Electric and are classified in current liabilities on the balance sheets as all borrowings are outstanding for no more than 364 days at one time.

As a result of the October 2017 Eversource parent long-term debt issuances on January 8, 2018, the net proceeds of which were used to repay short-term borrowings outstanding under its commercial paper program, $201.2 million of commercial paper borrowings under the Eversource parent commercial paper program $898.8 million of short-term debt waswere reclassified toas Long-Term Debt as of December 31, 2017.

As of September 30, 2018, there were intercompany loans from Eversource parent of $45.9 million to CL&P, $46.6 million to PSNH and $16.0 million to Harbor Electric Energy Company, a wholly-owned subsidiary of NSTAR Electric. Intercompany loans from Eversource parent to other Eversource subsidiaries primarily included $196.9 million to Eversource Service, $108.0 million to Aquarion, and $117.2 million to NSTAR Gas as of September 30, 2018. As of December 31, 2017, there were intercompany loans from Eversource parent of $69.5 million to CL&P and $262.9 million to PSNH. Intercompany loans from Eversource parent to other Eversource subsidiaries primarily included $115.9 million to Eversource Service and $198.0 million to NSTAR Gas as of December 31, 2017. These intercompany loans from Eversource parent are included in Notes Payable to Eversource Parent and are classified in current liabilities on the respective subsidiary's balance sheets. Intercompany loans from Eversource parent are eliminated in consolidation on Eversource's balance sheets.



NSTAR Electric hasLong-Term Debt:The following table summarizes long-term debt issuances and repayments:
(Millions of Dollars)Issue Date Issuances/(Repayments) Maturity Date Use of Proceeds for Issuances/
Repayment Information
CL&P:       
4.00% 2018 Series A First Mortgage BondsMarch 2018 $500.0
 April 2048 Repaid long-term debt that matured in 2018 and repaid short-term borrowings
5.65% 2008 Series A First Mortgage BondsMay 2008 (300.0) May 2018 Repaid at maturity on May 1, 2018
PSNH:       
6.00% 2008 Series O First Mortgage BondsMay 2008 (110.0) May 2018 Repaid at maturity on May 1, 2018
Other:       
Eversource Parent 2.50% Series I Senior Notes (1)
January 2018 200.0
 March 2021 Repaid long-term debt that matured in 2018 and repaid short-term borrowings
Eversource Parent 3.30% Series M Senior NotesJanuary 2018 450.0
 January 2028 Repaid long-term debt that matured in 2018
Eversource Parent 1.60% Series G Senior NotesJanuary 2015 (150.0) January 2018 Repaid at maturity on January 15, 2018
Eversource Parent 1.45% Series E Senior NotesMay 2013 (300.0) May 2018 Repaid at maturity on May 1, 2018
Yankee Gas 4.13% Series O First Mortgage BondsSeptember 2018 50.0
 October 2048 Repaid long-term debt that matured in 2018
NSTAR Gas 4.09% Series P First Mortgage BondsSeptember 2018 100.0
 October 2048 Repaid short-term borrowings
Yankee Gas 6.90% Series J First Mortgage BondsOctober 2018 (100.0) October 2018 Repaid at maturity on October 1, 2018

(1)
These notes are part of the same series issued by Eversource parent in March 2016. The aggregate outstanding principal amount for these notes is now $450 million.

On October 10, 2018, PSNH delivered a $450redemption notice for its $89.3 million commercial paper program allowing NSTAR Electricadjustable rate 2001 Series A Pollution Control Revenue Bonds.  The bonds, which are scheduled to issue commercial papermature on May 1, 2021, will be redeemed on November 28, 2018 at a redemption price of $89.3 million.  The bonds are classified as a form of short-term debt. As of September 30, 2017, NSTAR Electric had no short-term borrowings outstanding and as of December 31, 2016, NSTAR Electric had $126.5 million in short-term borrowings outstanding under its commercial paper program, leaving $450.0 million and $323.5 million of available borrowing capacityLong-Term Debt on the balance sheet as of September 30, 2017 and December 31, 2016, respectively.  The weighted-average2018.

Rate Reduction Bonds: PSNH Funding LLC 3 (PSNH Funding) is a bankruptcy remote, special purpose, wholly-owned subsidiary of PSNH. PSNH Funding was formed solely to issue RRBs to finance PSNH’s unrecovered stranded costs associated with the divestiture of its generation assets.

On May 8, 2018, PSNH Funding issued $635.7 million of securitized RRBs in multiple tranches with a weighted average interest rate of 3.66 percent, and final maturity dates ranging from 2026 to 2035.  The RRBs are expected to be repaid by February 1, 2033. RRB payments consist of principal and interest and will be paid semi-annually, beginning on these borrowings as of December 31, 2016 was 0.71 percent.  NSTAR Electric is a partyFebruary 1, 2019. The RRBs were issued pursuant to a five-year $450 million revolving credit facility. finance orderissued by the NHPUC on January 30, 2018 to recover stranded costs resulting from the divestiture of PSNH’s generation assets.

The revolving credit facility terminatesproceeds were used to purchase PSNH’s stranded cost asset-recovery property, including its vested property right to bill, collect and adjust a non-bypassable stranded cost recovery charge from PSNH’s retail customers. The collections will be used to pay principal, interest and other costs in connection with the RRBs. The RRBs are secured by the stranded cost asset-recovery property. Cash collections from the stranded cost recovery charges and funds on September 4, 2021.deposit in trust accounts are the sole source of funds to satisfy the debt obligation. PSNH is not the owner of the RRBs, and PSNH Funding’s assets and revenues are not available to pay PSNH’s creditors. The revolving credit facility serves to backstop NSTAR Electric's $450 million commercial paper program.  There were no borrowings outstanding on the revolving credit facility asRRBs are non-recourse senior secured obligations of September 30, 2017PSNH Funding and December 31, 2016.are not insured or guaranteed by PSNH or Eversource Energy.

Cash Flows:  Cash flows provided by operating activities totaled $1.49$1.41 billion in the first nine months of 2017,2018, compared with $1.65$1.48 billion in the first nine months of 2016.2017. The decrease in operating cash flows was due primarily to the $200.7cash payments made in 2018 for storm restoration costs of approximately $228 million, net unfavorable impact as a resultan increase of the change$67.4 million in income tax payments made, or refunds received, in 2017 when compared to 2016. This unfavorable impact was primarily the result of the December 2015 legislation, which extended the accelerated deduction of depreciation from 2015 to 2019. The legislation resulted in a significant refund of approximately $275 million, which we received in the first quarter of 2016. Additionally, there was an increase of $76.0 million in Pension and PBOP Plan cash contributions made in the first nine months of 2017,2018, as compared to 2017, and the same period in 2016. Partially offsetting these unfavorable impacts was the benefit related to the timing of regulatory recoveries and the timing of collections and payments of our working capital items, including accounts receivablereceivable. Partially offsetting these unfavorable impacts were the timing of cash collected for regulatory tracking mechanisms and accounts payable.a decrease of $9.0 million in 2018 of pension and PBOP contributions.

We believe the future operating cash flows of Eversource, CL&P, NSTAR Electric and PSNH, along with our existing borrowing availability and access to financial markets for the issuance of new long-term debt, will be sufficient to meet any working capital and future operating requirements, and capital investment forecast opportunities.

On September 6, 2017,10, 2018, our Board of Trustees approved a common share dividend payment of $0.475$0.505 per share, which was paid on September 29, 201728, 2018, to shareholders of record as of September 19,21, 2018. In the first nine months of 2018, we paid cash dividends of $480.1 million, compared with $451.6 million paid in the first nine months of 2017.

In the first nine months of 2017,2018, CL&P, NSTAR Electric and PSNH and WMECO paid $205.2$60.0 million, $186.0 million, $23.9$161.0 million, and $28.5$150.0 million, respectively, in common stock dividends to Eversource parent. In the first nine months of 2018, PSNH returned $530 million of capital to Eversource parent.



Investments in Property, Plant and Equipment on the statements of cash flows do not include amounts incurred on capital projects but not yet paid, cost of removal, AFUDC related to equity funds, and the capitalized and deferred portions of pension and PBOP expense.  In the first nine months of 2017,2018, investments for Eversource, CL&P, NSTAR Electric, and PSNH and WMECO were $1.64$1.89 billion, $621.9$660.7 million, $358.0 million, $215.5$539.0 million, and $109.2$236.2 million respectively.

Business Development and Capital Expenditures

Aquarion: On June 2, 2017, Eversource announced that it had entered into an agreement to acquire Aquarion from Macquarie Infrastructure Partners for $1.675 billion, consisting of approximately $880 million in cash and $795 million of assumed Aquarion debt. The transaction requires approval from PURA, the DPU, the NHPUC, the Maine PUC, and the Federal Communications Commission, and is also subject to a review under the Hart-Scott-Rodino Act. On June 29, 2017, Eversource and Aquarion filed joint applications with regulatory agencies in Connecticut, Massachusetts, New Hampshire and Maine requesting approval of the transaction. With the exception of Massachusetts, all state and federal regulatory agency approvals have been received and the related review period has expired. The transaction is expected to close by December 31, 2017.

Bay State Wind: Bay State Wind is a proposed offshore wind project being jointly developed by Eversource and Denmark-based Ørsted (formerly known as DONG Energy). Bay State Wind will be located in a 300-square-mile area approximately 15 to 25 miles south of Martha's Vineyard that has the ultimate potential to generate more than 2,000 MW of energy. Both Eversource and Ørsted hold a 50 percent ownership interest in Bay State Wind. In August 2016, Massachusetts passed clean energy legislation that requires EDCs to jointly solicit RFPs and enter into long-term contracts for offshore wind, creating RFP opportunities for projects like Bay State Wind. On June 29, 2017, the Bureau of Ocean Energy Management ("BOEM") approved the project’s Site Assessment Plan ("SAP"), the first BOEM approval of an offshore wind SAP in the U.S.

On June 29, 2017, the Massachusetts RFP was issued, seeking bids for a minimum of 400 MW of offshore wind capacity. The RFP states that bids of up to 800 MW would be considered, provided they demonstrate significant net economic benefits to customers. Bay State Wind submitted a Notice of Intent to Bid on July 26, 2017, and will submit a proposal by the December 20, 2017 due date.

Consolidated Capital Expenditures:Our consolidated capital expenditures, including amounts incurred but not paid, cost of removal, AFUDC, and the capitalized and deferred portions of pension and PBOP expense (all of which are non-cash factors), totaled $1.96 billion in the first nine months of 2018, compared to $1.69 billion in the first nine months of 2017, compared to $1.43 billion in the first nine months of 2016.2017.  These amounts included $97.8$113.9 million and $87.1$97.8 million in the first nine months of 20172018 and 2016,2017, respectively, related to information technology and facilities upgrades and enhancements, primarily at Eversource Service and The Rocky River Realty Company.

Offshore Wind Projects: Bay State Wind is a proposed offshore wind project being jointly developed by Eversource and Denmark-based Ørsted. Bay State Wind will be located in a 300-square-mile area of the Atlantic Ocean approximately 25 miles off the coast of Massachusetts that has the ultimate potential to generate at least 2,000 MW of clean, renewable energy. Eversource and Ørsted each hold a 50 percent ownership interest in Bay State Wind.

Based on current clean energy requirements in New England and New York, future solicitations for offshore wind are expected to occur in late 2018 and early 2019. Bay State Wind expects to participate, or has submitted proposals, in some or all of the following opportunities:

Connecticut issued an RFP for zero carbon resources for up to 12 terawatt hours, in which nuclear and clean energy resources, including offshore wind, are eligible to participate. Bay State Wind submitted its bid in September 2018. We currently expect a decision in late 2018 or early 2019.

Massachusetts’ second offshore wind RFP for 400 MW to 800 MW is expected to be issued no later than mid-2019.

New York has a goal to procure 2,400 MW of offshore wind by 2030. The New York State Energy Research and Development Authority ("NYSERDA") issued a draft RFP for 800 MW in September 2018, and the final RFP is expected to be issued in the fourth quarter of 2018. NYSERDA has the authority to award more than 800 MW in the first solicitation if sufficient attractive offers are received. Contracts are expected to be awarded in 2019.

Bay State Wind had previously participated in certain other New England RFPs earlier this year and was not selected.

Natural Gas Transmission Business: Access Northeast is a natural gas pipeline and storage project being developed jointly by Eversource, Enbridge, Inc. ("Enbridge") and National Grid plc ("National Grid"), through Algonquin Gas Transmission, LLC ("AGT"). Eversource owns a 40 percent interest in the project, which is accounted for as an equity method investment.

In 2015 and 2016, AGT sought to secure long-term natural gas pipeline capacity contracts with EDCs in Massachusetts, Connecticut, New Hampshire, Maine, and Rhode Island. Subsequently, in 2016, the Massachusetts Supreme Judicial Court and the NHPUC each ruled that state statutes precluded the state regulatory agencies from approving those contracts in Massachusetts and New Hampshire, respectively. The New Hampshire Supreme Court overruled the NHPUC decision in May 2018. Legislative changes are needed in Massachusetts to allow the DPU to approve natural gas pipeline capacity contracts. No such changes have occurred during any legislative session in 2017 or 2018.

In September 2018, certain non-Eversource natural gas related events in eastern Massachusetts resulted in widespread property and system damage, personal injuries, and a fatality. As a result of these events, compounded by the failure to secure Massachusetts legislation to date, we believe there is significant uncertainty around the future timing of, and ability to secure, needed legislative change affecting the natural gas industry and pipeline expansion, which may significantly delay the completion of the Access Northeast project.

Eversource identified the September 2018 natural gas related event, compounded by the adverse legislative environment, as negative evidence that indicated potential impairment. Our impairment assessment uses a discounted cash flow income approach, including consideration of the severity and duration of any decline in fair value of our investment in the project, and involves significant management judgment and estimation, including projections of the project’s discounted cash flows and assumptions about exit price. As of September 30, 2018, management determined that the future cash flows of the Access Northeast project are uncertain and can no longer be reasonably estimated and that the book value of our equity method investment is not recoverable. As a result, for the three months ended September 30, 2018, Eversource recorded an other-than-temporary impairment of $32.9 million within Other Income, Net on our statement of income, representing the full carrying value of our equity method investment.



Electric Transmission Business:  

Our consolidated electric transmission business capital expenditures increased by $40.9$124.4 million in the first nine months of 2017,2018, as compared to the first nine months of 2016.2017.  A summary of electric transmission capital expenditures by company is as follows:  
For the Nine Months Ended September 30,For the Nine Months Ended September 30,
(Millions of Dollars)2017 20162018 2017
CL&P$300.7
 $211.8
$346.7
 $300.7
NSTAR Electric108.5
 162.6
210.8
 179.4
PSNH87.4
 80.2
142.1
 87.4
WMECO70.9
 75.7
NPT32.1
 28.4
24.4
 32.1
Total Electric Transmission Segment$599.6
 $558.7
$724.0
 $599.6

Northern Pass:  Northern Pass is aEversource's planned 1,090 MW HVDC transmission line that will interconnect from the Québec-New Hampshire border to Franklin, New Hampshire and an associated alternating current radial transmission line between Franklin and Deerfield, New Hampshire.

Northern Pass has achieved several key milestones, including receiving the following major permits:

NHPUC approval on February 12, 2018 for the proposed lease of certain land and easement rights from PSNH to NPT, concluding that the lease is in the public interest;

U.S. Forest Service Record of Decision on January 5, 2018, which allows NPT to install approximately 11 miles of underground transmission lines along existing roads through the White Mountain National Forest;

Province of Québec permit granted to HQ on December 21, 2017 to construct the hydroelectric transmission line that will interconnectconnect at the border of New Hampshire;

DOE Record of Decision and Presidential Permit on November 16, 2017, which will allow construction of transmission facilities at the Québec-New Hampshire border with a planned HQ HVDC transmission line. border; and

On April 13, 2017, the New Hampshire Site Evaluation Committee ("NH SEC") commenced final adjudicative hearings that, on August 31, 2017, were extended and will result in the issuance of a final order by March 31, 2018.

On August 10, 2017, the DOE issued the final Environmental Impact Statement for Northern Pass concludingissued on August 10, 2017, which concluded that the proposed Northern Pass route is the preferred alternative, providing substantial benefits with only minimal impacts. Siting and permitting at both the state and federal levels is well advanced and the DOE is expected to issue the Presidential Permit for

On January 25, 2018, Northern Pass duringwas selected from the fourth quarter of 2017. Northern Pass is expected to be placed46 proposal packages submitted as the winning bidder in service in the second half of 2020.

In August 2016, Massachusetts enacted clean energy legislation that requires EDCs to solicit proposals jointly and enter into long-term contracts for energy, such as hydropower. The RFP was issued on March 31, 2017 and on July 27, 2017, Eversource Energy Transmission Ventures, Inc. and HQ jointly submitted proposals for Northern Pass into the Massachusetts clean energy RFP.request for proposal ("RFP"), which successfully positioned Northern Pass to provide a firm delivery of hydropower to Massachusetts.  On February 1, 2018, the NHSEC voted to deny Northern Pass’ siting application. On March 28, 2018, the Massachusetts EDCs, in coordination with the DOER and an independent evaluator, notified Northern Pass that the EDCs had terminated its selection and all contract negotiations.

On March 30, 2018, the NHSEC released its written decision confirming its denial. On April 27, 2018, NPT filed a motion for rehearing with the NHSEC and on July 12, 2018, the NHSEC issued its written decision denying Northern Pass’ motion for rehearing. On August 10, 2018, NPT filed an appeal to the New Hampshire Supreme Court, based on the NHSEC’s failure to follow applicable law in its review of the project. On October 12, 2018, the New Hampshire Supreme Court accepted this appeal and directed the NHSEC to transmit the record of its proceedings to the Court by December 11, 2018. The Supreme Court has not yet issued a schedule for the balance of the appeal process. In parallel, NPT intends to continue to pursue all available options to secure NHSEC approval and to construct the project.

The March 2018 NHSEC decision denying Northern Pass' siting application caused us to review the recoverability of our Northern Pass project costs in the first quarter of 2018. In this recoverability review, we estimated undiscounted expected project cash flows and compared the result to our estimated project costs to determine whether the recorded amount was recoverable. Our undiscounted cash flows were substantially in excess of our estimated project costs. We completed this analysis and concluded that our project costs were recoverable as of March 31, 2018, based on our expectation that the Northern Pass project remains probable of being placed in service. The events that occurred subsequent to March 31, 2018 did not require an additional review of recoverability of the Northern Pass project costs as of September 30, 2018, which were approximately $302 million.
Consistent with Eversource’s and HQ’s long-term relationship to bring clean energy into New England, Eversource and HQ remain committed to Northern Pass and the many benefits this project will bring to our customers and the region. If, as a result of future events and changes in circumstances, a new recoverability review were to conclude that our project costs are not recoverable, then we would reduce Northern Pass' project costs to the estimated fair value, which could result in most of our $302 million of capitalized project costs being impaired. Such an impairment could have a material adverse effect on our financial position and results of operations.



Greater Boston Reliability Solution: In February 2015, ISO-NE selected the Greater Boston and New Hampshire Solution (the "Solution"), proposed by Eversource and National Grid, to satisfy the requirements identified in the Greater Boston study.  The Solution consists of a portfolio of electric transmission upgrades coveringin southern New Hampshire and northern Massachusetts and continuing into the greater Boston metropolitan area, of which 28 upgrades are in Eversource's service territory. The NH SECNHSEC issued its written order approving the New Hampshire upgrades on October 4, 2016. All the New Hampshire upgrades, including the Merrimack Valley Reliability Project, have been completed and placed in service.  We are currently pursuing the necessary regulatory and siting application approvals in Massachusetts. To date, we have received approval for twofive of these projects from the Massachusetts Energy Facilities Siting Board. Construction has also begun on multiple projects, several smaller projects not requiring siting approval. Allof which have been placed in service. Most upgrades are expected to be completed by the end of 2019. One project is now expected to be in service by the end of 2020 and another project by mid-2021.  We estimate our portion of the investment in the Solution will be approximately $560 million, of which $186.3$311.4 million has been capitalized through September 30, 2017.2018.

GHCC:  The Greater Hartford Central Connecticut ("GHCC") projects, which have been approved by ISO-NE, consist of 27 projects with an expected investment of approximately $350 million that are expectedscheduled to be placed in service through 2019. SixteenAs of September 30, 2018, 21 projects have been placed in service, and eightsix projects are in active construction. As of September 30, 2017,2018, CL&P had capitalized $192.3$226.5 million in costs associated with GHCC.

Seacoast Reliability Project:  On April 12, 2016, PSNH filed a siting application with the NH SECNHSEC for the Seacoast Reliability Project, a 13-mile, 115kV transmission line within several New Hampshire communities, which proposes to use a combination of overhead, underground and underwater line design to help meet the growing demand for electricity in the Seacoast region.  In June 2016, the NH SECNHSEC accepted ourthe application as complete. DueOn February 28, 2018, the New Hampshire Department of Environmental Services issued a final decision and recommended approval of the application to delaysthe NHSEC. On July 1, 2018, PSNH filed with the siting hearings, we now expectNHSEC, per its order, a more detailed review of potential construction methods for installing the NH SECunderwater line. The review supports the original proposed method of embedding the cable in the floor of the bay as cost effective with minimal environmental impacts. The NHSEC decision is expected in mid-2018, and thisearly 2019. This project is now expectedscheduled to be completed by the end of 2019.  We estimate ourthe investment in this project to be approximately $84 million, of which PSNH had capitalized $29.4 million in costs through September 30, 2017, PSNH had capitalized $19.7 million in costs.2018.



Distribution Business:

A summary of distribution capital expenditures is as follows:
 For the Nine Months Ended September 30,
(Millions of Dollars) CL&P  NSTAR Electric  PSNH  WMECO  Total Electric  Natural Gas  Total Electric and Natural Gas Distribution Segment
2017             
Basic Business$161.8
 $110.3
 $52.5
 $16.4
 $341.0
 $51.3
 $392.3
Aging Infrastructure127.4
 49.6
 63.9
 16.3
 257.2
 149.6
 406.8
Load Growth (1)
41.0
 53.2
 14.1
 (1.5) 106.8
 30.6
 137.4
Total Distribution330.2
 213.1
 130.5
 31.2
 705.0
 231.5
 936.5
Generation (2)

 24.6
 6.7
 20.9
 52.2
 
 52.2
Total Electric and Natural Gas Distribution Segment$330.2
 $237.7
 $137.2
 $52.1
 $757.2
 $231.5
 $988.7
              
2016             
Basic Business$127.0
 $87.7
 $46.8
 $10.7
 $272.2
 $48.9
 $321.1
Aging Infrastructure97.4
 57.8
 61.9
 17.6
 234.7
 103.0
 337.7
Load Growth (1)
31.9
 48.1
 11.8
 (2.5) 89.3
 28.3
 117.6
Total Distribution256.3
 193.6
 120.5
 25.8
 596.2
 180.2
 776.4
Generation
 
 8.5
 
 8.5
 
 8.5
Total Electric and Natural Gas Distribution Segment$256.3
 $193.6
 $129.0
 $25.8
 $604.7
 $180.2
 $784.9

(1) For the nine months ended September 30, 2017 and September 30, 2016, WMECO had $11.0 million and $6.4 million, respectively, of total contributions in aid of construction, which were credits to capital expenditures for those periods.

(2) In 2017, NSTAR Electric and WMECO incurred capital expenditures related to the construction of solar generation facilities.
 For the Nine Months Ended September 30,
(Millions of Dollars) CL&P  NSTAR Electric  PSNH  Total Electric  Natural Gas Water  Total
2018             
Basic Business$199.5
 $144.6
 $57.4
 $401.5
 $52.7
 $10.9
 $465.1
Aging Infrastructure100.7
 79.7
 61.6
 242.0
 166.3
 51.4
 459.7
Load Growth and Other59.5
 39.3
 9.1
 107.9
 38.2
 1.8
 147.9
Total Distribution359.7
 263.6
 128.1
 751.4
 257.2
 64.1
 1,072.7
Generation and Solar
 48.1
 0.9
 49.0
 
 
 49.0
Total$359.7
 $311.7
 $129.0
 $800.4
 $257.2
 $64.1
 $1,121.7
              
2017             
Basic Business$161.8
 $126.7
 $52.5
 $341.0
 $51.3
 N/A
 $392.3
Aging Infrastructure127.4
 65.9
 63.9
 257.2
 149.6
 N/A
 406.8
Load Growth and Other41.0
 51.7
 14.1
 106.8
 30.6
 N/A
 137.4
Total Distribution330.2
 244.3
 130.5
 705.0
 231.5
 N/A
 936.5
Generation and Solar
 45.5
 6.7
 52.2
 
 N/A
 52.2
Total$330.2
 $289.8
 $137.2
 $757.2
 $231.5
 N/A
 $988.7

For the electric distribution business, basic business includes the purchase of meters, tools, vehicles, information technology, transformer replacements, equipment facilities, and the relocation of plant.  Aging infrastructure relates to reliability and the replacement of overhead lines, plant substations, underground cable replacement, and equipment failures.  Load growth and other includes requests for new business and capacity additions on distribution lines and substation additions and expansions.  

For the natural gas distribution segment,business, basic business addresses daily operational needs including meters, pipe relocations due to public works projects, vehicles, and tools.  Aging infrastructure projects seek to improve the reliability of the system through enhancements related to cast iron and bare steel replacement of main and services, corrosion mediation, and station upgrades.  Load growth and other reflects growth in existing service territories including new developments, installation of services, and expansion.

The natural gasFor the water distribution segment's capital spending program increased by $51.3 millionbusiness, basic business addresses daily operational needs including periodic meter replacement, water main relocation, facility maintenance, and tools. Aging infrastructure relates to reliability and the replacement of water mains, regulators, storage tanks, pumping stations, wellfields, reservoirs, and treatment facilities. Load growth and other reflects growth in the first nine monthsour territory including improvements to acquisitions, installation of 2017, as compared to the first nine monthsnew services, and interconnections of 2016, primarily due to an increased investment in system replacement and reliability, as well as upgrades to our LNG facilities. We expect the LNG facility upgrades to cost approximately $200 million and to be placed in service in late 2019.systems.



FERC Regulatory Matters

FERC Transmission Rate Settlement:  On December 28, 2015, FERC initiated a proceeding to review the New England transmission owners’ (NETOs) regional and local transmission rates due to a lack of transparency. The FERC also found that the formula rates generally lacked sufficient details to determine how costs are derived and recovered in rates. This proceeding was set for hearing but held in abeyance to provide time for settlement judge procedures. On August 17, 2018, a signed Settlement Agreement between twenty-eight parties, including all six New England state regulatory commissions, the NETOs (including CL&P, NSTAR Electric and PSNH) and other settling parties, was filed at the FERC. The Settlement Agreement includes, among other things, a new formula rate template, effective on January 1, 2020, in which all regional and local transmission revenue requirements will be determined through a single formula rate. The Settlement Agreement will need to be certified to the FERC by the Settlement Administrative Law Judge and then ordered on by the FERC.

FERC ROE Complaints: Four separate complaints have been filed at the FERC by combinations of New England state attorneys general, state regulatory commissions, consumer advocates, consumer groups, municipal parties and other parties (collectively the "Complainants"). In each of the first three complaints, filed on October 1, 2011, December 27, 2012, and July 31, 2014, respectively, the Complainants challenged the NETOs' base ROE of 11.14 percent that had been utilized since 2005 and sought an order to reduce it prospectively from the date of the final FERC order and for the separate 15-month complaint periods. In the fourth complaint, filed April 29, 2016, the Complainants challenged the NETOs' base ROE of 10.57 percent and the maximum ROE for transmission incentive ("incentive cap") of 11.74 percent, asserting that these ROEs were unjust and unreasonable.

In response to appeals ofOn October 16, 2014, the FERC decision inset the base ROE at 10.57 percent and the incentive cap at 11.74 percent for the first complaint filedperiod. This was also effective for all prospective billings to customers beginning October 16, 2014. This FERC order was vacated on April 14, 2017 by the NETOs and the Complainants, the U.S. Court of Appeals for the D.C. Circuit (the "Court") issued a decision on April 14, 2017 vacating and remanding the FERC's decision. The Court found that the FERC failed to make an explicit finding that the 11.14 percent base ROE was unjust and unreasonable, as required under Section 206 of the Federal Power Act, before it set a new base ROE. The Court also found that the FERC did not provide a rational connection between the record evidence and its decision to select the midpoint of the upper half of the zone of reasonableness for the new base ROE..

On May 26, 2017,The ROE billed during the Chief Administrative Law Judge ("ALJ") issued an order that the fourth complaint will continue to trial in December 2017 with an ALJ initial decision expected in March of 2018.



A summary of the four separate complaints and the base ROEs pertinent to those complaints are as follows:
Complaint
15-Month Time Period
of Complaint
(Beginning as of Complaint Filing Date)
Original Base ROE Authorized by FERC at Time of Complaint
Filing Date (1)
Base ROE Subsequently Authorized by FERC for First Complaint Period and also Effective from
October 16, 2014 through April 14, 2017 (1)
Reserve
(Pre-Tax and Excluding Interest) as of September 30, 2017
(in millions)
 
FERC ALJ Recommendation of Base ROE on Second and
Third Complaints
(Issued March 22, 2016)
First10/1/2011 - 12/31/201211.14%10.57%$—
(2) 
N/A
Second12/27/2012 - 3/26/201411.14%N/A39.1
(3) 
9.59%
Third7/31/2014 - 10/30/201511.14%10.57% 10.90%
Fourth4/29/2016 - 7/28/201710.57%10.57% N/A

(1) The billed ROE (base plus incentives) betweenperiod October 1, 2011 and(beginning of the first complaint period) through October 15, 2014 was withinconsisted of a rangebase ROE of 11.14 percent and incentives up to 13.1 percent. On October 16, 2014, the FERC set the incentive cap at 11.74 percent for the first complaint period and also effective from October 16, 2014 through April 14, 2017, the date on which the Court vacated this FERC order.
(2) CL&P, NSTAR Electric, PSNH and WMECO have refunded allAll amounts associated with the first complaint period totaling $38.9have been refunded. Eversource has recorded a reserve of $39.1 million (pre-tax and excluding interest) at Eversource (consistingfor the second complaint period as of $22.4 million at CL&P, $8.4 million at NSTAR Electric, $2.8 million at PSNH, and $5.3 million at WMECO), reflecting both the base ROE and incentive cap prescribed by the FERC order.

(3) TheSeptember 30, 2018. This reserve represents the difference between the ROEs billed rates during the second complaint period and a 10.57 percent base ROE and 11.74 percent incentive cap. The reserve consisted of $21.4 million for CL&P, $8.5$14.6 million for NSTAR Electric and $3.1 million for PSNH and $6.1 million for WMECO as of September 30, 2017.2018.

On June 5, 2017,October 16, 2018, FERC issued an order on all four complaints describing how it intends to address the issues that were remanded by the Court. FERC proposed a new framework to determine (1) whether an existing ROE is unjust and unreasonable and, if so, (2) how to calculate a replacement ROE. The parties to these proceedings were directed to submit briefs on this new proposed framework and how they would apply them in each of the four complaint proceedings. Briefs and reply briefs will be filed in the first quarter of 2019.

The FERC order included illustrative calculations for the first complaint, using FERC's proposed frameworks with financial data from that complaint. Those preliminary calculations indicated that for the first complaint period, for the NETOs including Eversource, submittedthat FERC concludes are of average financial risk, (1) a filingpreliminary range of presumptively just and reasonable base ROEs is 9.60 percent to 10.99 percent; (2) the FERC to reinstate thepre-existing base ROE of 11.14 percent with an associatedis therefore unjust and unreasonable; (3) the preliminary just and reasonable base ROE is 10.41 percent; and (4) the preliminary incentive cap on total ROE is 13.08 percent. If the results of 13.5 percent effective June 8, 2017, as these illustrative calculations were the last ROEs lawfullyincluded in effect for transmission billing purposes prior to thea final FERC order, vacated bythen the Court on April 14, 2017. On October 6, 2017, the FERC did not accept the NETOs filing, temporarily leaving in place the ROEs (10.5710.41 percent base ROE with an 11.74and a 13.08 percent incentive cap ROE) set inwould not have a significant impact on our financial statements for the first complaint proceeding until the FERC addresses the Court’s decision.period.

On October 5, 2017Although the NETOs filedorder provided illustrative calculations, FERC stated that these calculations are merely preliminary. The FERC’s preliminary calculations are not binding and do not represent what we believe to be the most likely outcome of a seriesfinal FERC order, as significant changes to the methodology by FERC are possible as a result of motions, requesting that the FERC dismiss the four complaint proceedings. Alternatively, if the FERC does not dismiss the proceedings, the NETOs requested that the FERC consolidate all four complaint proceedings for expeditious resolution and/or stay the trialparties’ arguments and calculations in the fourth complaint proceedingbriefing process. Until FERC issues a final decision on each of these four complaints, there is significant uncertainty, and resolve it based on the standards set in the April 14, 2017 Court decision.

Atat this time, the Company cannot reasonably estimate a range of gain or loss for any of the four complaint proceedings. The April 14, 2017 Court decision didOctober 16, 2018 FERC order does not provide a reasonable basis for a change to the reserve balance of $39.1 million (pre-tax, excluding interest) for the second complaint period, and the Company has not changed its reserve or recognized ROEs for any of the complaint periods.

Management cannot at this time predict the ultimate effect of the Court decision or future FERC action on any of the complaint periods or the estimated impacts on the financial position, results of operations or cash flows of Eversource, CL&P, NSTAR Electric and PSNH or WMECO.currently record revenues at the 10.57 percent base ROE and incentive cap at 11.74 percent established in the October 16, 2014 FERC order.

The average impact of a 10 basis point change to the base ROE for each of the 15-month complaint periods would affect Eversource's after-tax earnings by approximately $3 million.

NSTAR Electric and WMECO Merger FERC Filings:U.S. Federal Corporate Income Taxes: On March 15, 2018, the FERC issued a notice of inquiry requesting comments from FERC-regulated utilities on whether and how the FERC should address changes in ADIT as a result of the Tax Cuts and Jobs Act. Effective January 13, 2017, Eversource made two filings with1, 2018, the local transmission service rates were updated to reflect the lower U.S. federal corporate income tax rate that resulted from the act, which impacts only the revenue requirements we currently bill customers, not the excess ADIT. On June 28, 2018, FERC granted a one-time tariff waiver related to the proposed merger of WMECO into NSTAR Electric with an anticipatedfederal corporate income tax rate so that effective date of December 31, 2017. One filing requests FERC approval ofJune 1, 2018, the merger, andregional transmission service rates reflect the other filing requests FERC approval of NSTAR Electric's assumption of WMECO's short-term debt obligations. The FERC approved the merger on March 2, 2017 and will act on the assumption of debt filing by the end of 2017.reduced federal corporate income tax rate at 21 percent.



Regulatory Developments and Rate Matters

Electric, and Natural Gas and Water Base Distribution Rates:  

The Regulatedregulated companies’ distribution rates are set by their respective state regulatory commissions, and their tariffs include mechanisms for periodically adjusting their rates for the recovery of specific incurred costs.  Other than as described below, for the first nine months of 2017,2018, changes made to the Regulatedregulated companies’ rates did not have a material impact on their earnings, financial position, or cash flows.  For further information, see "Financial Condition and Business Analysis – Regulatory Developments and Rate Matters" included in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," of the Eversource 20162017 Form 10-K.

U.S. Federal Corporate Income Taxes:

On December 22, 2017, the Tax Cuts and Jobs Act became law, which amended existing federal tax rules to reduce the U.S. federal corporate income tax rate from 35 percent to 21 percent effective January 1, 2018. For our regulated companies, the most significant changes are (1) the benefit of incurring a lower federal income tax expense, which we expect to be passed back to customers once reflected in rates, depending on regulatory outcomes, and (2) the provisional regulated excess ADIT liabilities that we expect will benefit our customers in future periods, which were estimated to be approximately $2.9 billion and included in regulatory liabilities as of September 30, 2018.

Eversource established a liability, recorded as a reduction to revenue, to reflect the difference between the 35 percent federal corporate income tax rate included in rates charged to customers and the 21 percent federal corporate income tax rate, effective January 1, 2018 as a result of the Tax Cuts and Jobs Act, until rates billed to customers reflect the lower federal tax rate. As of September 30, 2018, this liability, net of amounts refunded to customers, was $36.2 million.

For information on filings with regulatory commissions and the impact to customer rates, see "Connecticut," "Massachusetts," and "New Hampshire" sections below and "FERC Regulatory Matters - U.S. Federal Corporate Income Taxes" in this Management's Discussion and Analysis of Financial Condition and Results of Operations.
Connecticut:

CL&P Rate Case Settlement:On April 20, 2017,18, 2018, PURA approved the joint request ofdistribution rate case settlement agreement that was reached by CL&P, the Connecticut OfficeProsecutorial Unit of Consumer CounselPURA, and the Connecticut Attorney General to amend the deadline to establish new electricOCC on December 15, 2017, as amended on March 23, 2018. The distribution rates in the 2012 Connecticut mergerrate case settlement agreement from "no later than December 1, 2017" to "no later than July 1, 2018." On October 27, 2017, CL&P filed a letteragreement included, among other things, rate increases of intent with PURA to request a rate increase of $255.8$64.3 million, $45$31.1 million, and $36$29.2 million, effective May 1, 2018, 2019, and 2020, respectively.respectively, an authorized regulatory ROE of 9.25 percent, 53 percent common equity in CL&P's capital structure, and a new capital tracker, effective July 1, 2018, for core capital additions in excess of $270 million per rate year and also for capital additions for system resiliency and grid modernization. The new capital tracker also included a provision to return to customers the impact of a lower federal corporate income tax rate from the Tax Cuts and Jobs Act from January through April 2018, offset by the impacts of rate base growth since the previous rate case for the same period. In addition, the distribution rates charged to customers were adjusted to reflect the prospective impacts of a lower federal income tax rate from the Tax Cuts and Jobs Act. Amounts related to the excess ADIT liabilities will be incorporated into the May 1, 2019 distribution rate change. The settlement agreement also incorporated $18.6 million of rate base recovery for catastrophic storms occurring after December 31, 2016, subject to a future storm filing.


Massachusetts:

EversourceYankee Gas Rate Case Settlement: On June 15, 2018, Yankee Gas filed its rate case application with PURA. On September 21, 2018, an amended settlement agreement was reached with the Office of Consumer Counsel and NSTAR Electric Boston Harbor Civil Action: On July 15, 2016, the United States Attorney on behalfprosecutorial division of the United States Army CorpsPURA and filed for approval by PURA, which included revised rate increases of Engineers filed a civil action in the United States District Court$1.4 million, $15.8 million and $13.0 million, for the District of Massachusetts under provisions of the Riversrate years beginning November 15, 2018, January 1, 2020, and Harbors Act of 1899 and the Clean Water Act against NSTAR Electric, Harbor Electric Energy Company, a wholly-owned subsidiary of NSTAR Electric ("HEEC"), and the Massachusetts Water Resources Authority (together with NSTAR Electric and HEEC, the "Defendants").  The action alleged that the Defendants failed to comply with certain permitting requirements related to the placement of the HEEC-owned electric distribution cable beneath Boston Harbor.  The action sought an order to compel HEEC to comply with cable depth requirements in the United States Army Corps of Engineers' permit or alternatively to remove the electric distribution cable and cease unauthorized work in U.S. waterways.  The action also sought civil penalties and other costs.  

After substantial negotiations, the parties reached a settlement whereby HEEC will install a new 115kV distribution cable across Boston Harbor to Deer Island, utilizing a different route, and will remove portions of the existing cable. Upon the installation and completion of the new cable and the removal of the portions of the existing cable, all issues surrounding the current permit from the United States Army Corps of Engineers are expected to be resolved, and such litigation is expected to be dismissed with prejudice.

In 2017, as a resultJanuary 1, 2021, respectively. As part of the settlement, NSTAR Electric expensed $4.9Yankee Gas proposed to continue its ongoing natural gas system expansion program, implement a Distribution Integrity Management Program cost recovery mechanism that includes recovery of approximately $26 million (pre-tax)to $37 million of previously incurred capitalized costs associated with engineering work performed on the existing cable that will no longer be used. In addition, NSTAR Electric agreed to provide acapital additions annually in excess of $150 million included in rate base credit of $17.5 million to the Massachusetts Water Resources Authority for the new cable. This negotiated credit will result in the initial $17.5 million of construction costs on the new cable to be expensed as incurred. Construction of the new cable is expected to be completed in 2019.

Massachusetts RFPs: On March 31, 2017, pursuant to a comprehensive energy law enacted in 2016, "An Act to Promote Energy Diversity," (the "Act") the Massachusetts EDCs, including NSTAR Electric and WMECO, and the DOER issued a joint RFP for 9.45 terawatt hours of clean energy per year, such as hydropower, land-based wind or solar. The RFP seeks proposals for long-term contracts of 15 to 20 years to provide the state's electric distribution companies with clean energy generation. The proposal submission due date was July 27, 2017. Contracts will be selected in January 2018, with an expectation to submit executed long-term contracts to the DPU for final approval in April 2018. On July 27, 2017, Eversource Energy Transmission Ventures, Inc. and HQ jointly submitted proposals for Northern Pass into the Massachusetts clean energy RFP. Northern Pass is expected to be placed in service in the second half of 2020.

On June 29, 2017, pursuant to the Act, the Massachusetts EDCs, including NSTAR Electric and WMECO, and the DOER issued a joint RFP for long-term contracts for offshore wind energy projects, seeking bids for a minimum of 400 MW of offshore wind capacity. The Offshore Wind Energy RFP states that bids of up to 800 MW would be considered, provided they demonstrate significant net economic benefits to customers. Bay State Wind submitted a Notice of Intent to Bid on July 26, 2017 and will submit a proposal by the December 20, 2017 due date.

NSTAR Electric and WMECO Rate Case: On January 17, 2017, NSTAR Electric and WMECO jointly filed an application (the "Joint Applicants") with the DPU for approval of a combined $96 million increase in base distribution rates, effective January 1, 2018. As part of this filing, the Joint Applicants are presenting a grid-wise performance plan, including the implementation of a performance-based rate-making mechanism in conjunction with a grid modernization base commitment of $400 million in incremental capital investment over a period of five years, commencing January 1, 2018. In addition, the Joint Applicants proposed to streamline and align rate classifications between NSTAR Electric and WMECO, and requestedimplement a revenue decoupling rate mechanism, for NSTAR Electric. WMECO hasand recover merger costs. The settlement agreement includes a revenue decoupling mechanism in place. The DPUregulatory ROE of 9.3 percent. In addition, the distribution rates to be charged to customers will also be reviewingadjusted to reflect the proposed December 31, 2017 merger of NSTAR Electric and WMECO as partprospective impacts of the lower federal corporate income tax rate, case.the overcollection of the lower income tax rate from January 1, 2018, and the excess ADIT from the Tax Cuts and Jobs Act. The settlement results in new rates effective November 15, 2018. A final decision from the DPUPURA is expected in late 2017, with new2018.

Massachusetts:

U.S. Federal Corporate Income Taxes: The DPU opened an investigation into the impact of the Tax Cuts and Jobs Act on Massachusetts regulated utilities. On June 29, 2018, the DPU issued a decision ordering NSTAR Gas to lower rates anticipatedeffective July 1, 2018 by an annualized $7.3 million. For NSTAR Electric, lower rates due to bethe reduction in the federal corporate income tax rate were effective February 1, 2018. A second phase of the investigation will address the excess ADIT issue and any potential refunds for the periods January 1, 2018 to the effective dates of the rate changes that have occurred. On September 19, 2018, NSTAR Electric submitted a filing to the DPU to adjust rates to refund the excess ADIT to customers, effective January 1, 2018.2019. NSTAR Gas' excess ADIT is pending DPU approval.



New Hampshire:

Generation Divestiture: OnIn June 10, 2015, Eversource and PSNH entered into the 2015 Public Service Company of New Hampshire Restructuring and Rate Stabilization Agreement, (the "Agreement") with the New Hampshire Office of Energy and Planning, certain members of the NHPUC staff, the Office of Consumer Advocate, two State Senators, and several other parties.  Under the terms of the Agreement,pursuant to which PSNH agreed to divest its generation assets, subject to NHPUC approval.  The Agreement provided for a resolution of issues pertaining to PSNH's generation assets in pending regulatory proceedings before the NHPUC.  The Agreement provided for the Clean Air Project prudence proceeding to be resolved and all remaining Clean Air Project costs to be included in rates effective January 1, 2016.  As part of the Agreement, PSNH agreed to forego recovery of $25 million of the equity return related to the Clean Air Project.  

On July 1, 2016, the NHPUC approved the Agreement in an order that, among other things, instructed PSNH to begin the process of divesting its generation assets.  The NHPUC selected an auction adviser to assist with the divestiture, andthis agreement as well as the final divestiture plan and auction process were approved byin the NHPUC in Novembersecond half of 2016.

On October 11, 2017, PSNH entered into two Purchase and Sale Agreements ("Agreements")with private investors, one to sell its thermal generation assets at a purchase price of $175 million, subject to adjustment, (the “Thermal Agreement”) and a second to sell its hydroelectric generation assets at a purchase price of $83 million, subject to private investors atadjustment (the “Hydro Agreement”). The NHPUC approved these agreements in late November 2017.

On January 10, 2018, PSNH completed the sale of its thermal generation assets pursuant to the Thermal Agreement. In accordance with the Thermal Agreement, the original purchase pricesprice of $175 million was adjusted to reflect working capital adjustments, closing date adjustments and proration of taxes and fees prior to closing, totaling $40.9 million, resulting in net proceeds of $134.1 million. In the second quarter of 2018, the purchase price was further adjusted by $17.3 million relating to the valuation of certain allowances. As a result of these adjustments, net proceeds from the sale of the thermal assets totaled $116.8 million.

On July 16, 2018, FERC issued its order approving the transfer of PSNH's six hydroelectric licenses to private investors. On August 26, 2018, PSNH completed the sale of its hydroelectric generation assets pursuant to the Hydro Agreement. In accordance with the Hydro Agreement, the original purchase price of $83 million respectively, subjectwas adjusted to reflect contractual adjustments totaling $5.7 million, resulting in net proceeds of $77.3 million. The difference between the carrying value of the hydroelectric generation assets and the sale proceeds resulted in a gain of $17.2 million. An estimated gain from the sale of these assets was included as set forth in each Agreement.
On October 12, 2017, PSNH filed an applicationoffset to the total stranded costs associated with the sale of generation assets.

On May 8, 2018, PSNH Funding issued $635.7 million of securitized RRBs pursuant to a finance order issued by the NHPUC requesting approval of the Agreements. We expecton January 30, 2018 to receive approvalsrecover stranded costs resulting from the NHPUC and other necessary regulatory agencies by late December 2017 or early 2018, with the transactions to be completed shortly thereafter. Upon completion, full recoverydivestiture of PSNH'sPSNH’s generation assets will occur through a combination of cash flows during the remaining operating period, sales proceeds, and recovery of stranded costs viaassets.  These bonds that will beare secured by a non-bypassable charge or through recoveries in future rates billed to PSNH's customers. PSNH recorded regulatory assets and other deferred costs in connection with the generation asset divestiture and the securitization of stranded costs, which are probable of recovery through collection of the non-bypassable charge. For further information on the securitized RRB issuance, see "Liquidity - Rate Reduction Bonds" in this Management's Discussion and Analysis of Financial Condition and Results of Operations.



U.S. Federal Corporate Income Taxes:On September 27, 2018, the NHPUC issued a decision on the impact of the U.S. federal corporate income tax rate reduction from the Tax Cuts and Jobs Act. The NHPUC concluded that the tax law change qualified as an exogenous event, as defined in the 2015 Public Service Company of New Hampshire Restructuring and Rate Stabilization Agreement, and that the benefit of incurring the lower federal income tax expense would be passed back to customers with carrying charges. Distribution rates are to reflect the deferred excess ADIT, the impact of the lower federal income tax rate, and the overcollection of the lower income tax rate from January 1, 2018 to the rate adjustment effective date of July 1, 2019, or earlier if a rate case is filed for rates effective prior to July 1, 2019. As of September 30, 2017, PSNH's energy service2018, PSNH has recorded a reserve of $9.4 million to reflect the difference between the 35 percent federal corporate income tax rate base balance was approximately $594 million,included in rates charged to customers and the carrying value of PSNH's total generation assets subject to divestiture was approximately $767 million.21 percent federal corporate income tax rate, effective January 1, 2018.

Legislative2011 through 2013 Storm Costs:On September 17, 2018, the NHPUC approved the recovery of $49 million, plus carrying charges, in storm costs incurred from August 2011 through March 2013 and Policy Matters

On August 11, 2017, Massachusetts issued final legislation, pursuantthe transfer of funding from PSNH’s major storm funding reserve to Executive Order 569, which established volumetric limitsoffset those costs. The costs of these storms (excluding the equity return component of the carrying charges) were deferred as regulatory assets, and the funding reserve collected from customers was accrued as a regulatory liability. The storm cost deferral is separate from the major storm funding reserve that is being collected from customers. As a result of the approval, PSNH recognized $8.7 million (pre-tax) within Other Income, Net on multiple greenhouse emission sources to ensure reductions are realized by deadlines establishedour statement of income in the Massachusetts Global Warming Solutions Act enacted in 2008. Under this legislation,third quarter of 2018 for the initial target date for reduction in greenhouse gas emissions hasequity return component of the carrying charges, which have been established inbilled and collected. Storm costs incurred from March 2013 through 2016 are currently being audited by the year 2020. The legislation is not expectedNHPUC staff. As of September 30, 2018, the pre-tax equity return component of the carrying charges related to have a material impact on the financial statementsstorms incurred after March 2013 was $6.5 million, which will be recognized to earnings upon NHPUC approval of Eversource, NSTAR Electric or WMECO.those storm costs.

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 that we believed were the most critical in nature were reported in the Eversource 20162017 Form 10-K.  There have been no material changes with regard to these critical accounting policies.

See Note 1C, "Summary of Significant Accounting Policies – Northern Pass," and Note 1D, "Summary of Significant Accounting Policies – Impairment of Access Northeast," to the financial statements for further discussion of critical accounting estimates surrounding impairment analysis.

Other Matters

Accounting Standards:  For information regarding new accounting standards, see Note 1B, "Summary of Significant Accounting Policies –Accounting– Accounting Standards," to the financial statements.

Contractual Obligations and Commercial Commitments:  There have been no material contractual obligations identified and no material changes with regard to the contractual obligations and commercial commitments previously disclosed in the Eversource 20162017 Form 10-K.



Web Site:  Additional financial information is available through our website at www.eversource.com.  We make available through our website a link to the SEC's EDGAR website (http://www.sec.gov/edgar/searchedgar/companysearch.html), at which site Eversource's, CL&P's, NSTAR Electric's PSNH's and WMECO'sPSNH's combined Annual Reports on Form 10-K, combined Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports may be reviewed.  Information contained on the Company's website or that can be accessed through the website is not incorporated into and does not constitute a part of this combined Quarterly Report on Form 10-Q.



RESULTS OF OPERATIONS – EVERSOURCE ENERGY AND SUBSIDIARIES

The following provides the amounts and variances in operating revenues and expense line items in the statements of income for Eversource for the three and nine months ended September 30, 20172018 and 20162017 included in this combined Quarterly Report on Form 10-Q:  
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Millions of Dollars)2017 2016 Increase/
(Decrease)
 Percent 2017 2016 Increase/
(Decrease)
 Percent
Operating Revenues$1,988.5
 $2,039.7
 $(51.2) (2.5)% $5,856.5
 $5,862.5
 $(6.0) (0.1)%
Operating Expenses: 
  
  
  
    
  
  
Purchased Power, Fuel and Transmission651.8
 665.8
 (14.0) (2.1) 1,955.1
 2,001.9
 (46.8) (2.3)
Operations and Maintenance300.4
 324.7
 (24.3) (7.5) 933.4
 965.6
 (32.2) (3.3)
Depreciation194.5
 181.3
 13.2
 7.3
 571.2
 531.8
 39.4
 7.4
Amortization of Regulatory Assets, Net41.8
 43.9
 (2.1) (4.8) 58.1
 56.2
 1.9
 3.4
Energy Efficiency Programs129.2
 149.1
 (19.9) (13.3) 391.8
 406.0
 (14.2) (3.5)
Taxes Other Than Income Taxes168.2
 165.0
 3.2
 1.9
 479.6
 479.2
 0.4
 0.1
Total Operating Expenses1,485.9
 1,529.8
 (43.9) (2.9) 4,389.2
 4,440.7
 (51.5) (1.2)
Operating Income502.6
 509.9
 (7.3) (1.4) 1,467.3
 1,421.8
 45.5
 3.2
Interest Expense108.7
 99.9
 8.8
 8.8
 319.5
 298.6
 20.9
 7.0
Other Income, Net21.2
 13.6
 7.6
 55.9
 56.3
 23.7
 32.6
 (a)
Income Before Income Tax Expense415.1
 423.6
 (8.5) (2.0) 1,204.1
 1,146.9
 57.2
 5.0
Income Tax Expense152.8
 156.4
 (3.6) (2.3) 447.9
 428.2
 19.7
 4.6
Net Income262.3
 267.2
 (4.9) (1.8) 756.2
 718.7
 37.5
 5.2
Net Income Attributable to Noncontrolling Interests1.9
 1.9
 
 
 5.6
 5.6
 
 
Net Income Attributable to Common Shareholders$260.4
 $265.3
 $(4.9) (1.8)% $750.6
 $713.1
 $37.5
 5.3 %
(a) Percent greater than 100 not shown as it is not meaningful.
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Millions of Dollars)2018 2017 Increase/
(Decrease)
 2018 2017 Increase/
(Decrease)
Operating Revenues$2,271.4
 $1,988.5
 $282.9
 $6,413.2
 $5,856.5
 $556.7
Operating Expenses: 
  
  
    
  
Purchased Power, Fuel and Transmission842.3
 651.8
 190.5
 2,443.0
 1,955.1
 487.9
Operations and Maintenance344.5
 307.7
 36.8
 970.9
 956.3
 14.6
Depreciation208.7
 194.5
 14.2
 612.1
 571.2
 40.9
Amortization92.7
 41.8
 50.9
 174.1
 58.1
 116.0
Energy Efficiency Programs130.0
 129.2
 0.8
 366.1
 391.8
 (25.7)
Taxes Other Than Income Taxes187.2
 168.2
 19.0
 547.1
 479.6
 67.5
Total Operating Expenses1,805.4
 1,493.2
 312.2
 5,113.3
 4,412.1
 701.2
Operating Income466.0
 495.3
 (29.3) 1,299.9
 1,444.4
 (144.5)
Interest Expense125.2
 108.7
 16.5
 372.7
 319.5
 53.2
Other Income, Net16.7
 28.5
 (11.8) 100.6
 79.2
 21.4
Income Before Income Tax Expense357.5
 415.1
 (57.6) 1,027.8
 1,204.1
 (176.3)
Income Tax Expense66.2
 152.8
 (86.6) 220.5
 447.9
 (227.4)
Net Income291.3
 262.3
 29.0
 807.3
 756.2
 51.1
Net Income Attributable to Noncontrolling Interests1.9
 1.9
 
 5.6
 5.6
 
Net Income Attributable to Common Shareholders$289.4
 $260.4
 $29.0
 $801.7
 $750.6
 $51.1

Operating Revenues
A summary of our Operating Revenues by segment isincreased/(decreased) for the three and nine months ended September 30, 2018, as follows:compared to the same periods in 2017, as follows (the variance in electric distribution revenues reflects intercompany transmission billings in both periods):
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Millions of Dollars)2017 2016 Increase/
(Decrease)
 Percent 2017 2016 Increase/
(Decrease)
 Percent
Electric Distribution$1,547.1
 $1,623.4
 $(76.3) (4.7)% $4,224.2
 $4,362.6
 $(138.4) (3.2)%
Natural Gas Distribution109.2
 99.2
 10.0
 10.1
 698.8
 622.3
 76.5
 12.3
Electric Transmission328.5
 306.8
 21.7
 7.1
 970.0
 892.5
 77.5
 8.7
Other and Eliminations3.7
 10.3
 (6.6) (64.1) (36.5) (14.9) (21.6) (a)
Total Operating Revenues$1,988.5
 $2,039.7
 $(51.2) (2.5)% $5,856.5
 $5,862.5
 $(6.0) (0.1)%
(a) Percent greater than 100 not shown as it is not meaningful.
(Millions of Dollars)Three Months Ended Nine Months Ended
Electric Distribution$210.3
 $338.1
Natural Gas Distribution(0.2) 41.7
Electric Transmission2.1
 (17.0)
Water Distribution63.5
 161.5
Other0.4
 15.0
Eliminations6.8
 17.4
Total Operating Revenues$282.9
 $556.7

Sales Volumes:A summary of our retail electric GWh sales volumes, and our firm natural gas MMcf sales volumes, in MMcf wereand our water MG sales volumes, and percentage changes, for the three and nine months ended September 30, 2018, as compared to 2017, is as follows:
 Electric Firm Natural Gas Water
 Sales Volumes (GWh) Percentage
Increase
 Sales Volumes (MMcf) Percentage
Increase/
(Decrease)
 Sales Volumes (MG) Percentage
Increase/
(Decrease)
 2018 
2017 (1)
  2018 2017  2018 
2017 (2)
 
Three Months Ended September 30:                 
Traditional2,206
 2,020
 9.2% 5,984
 5,550
 7.8 % 732
 706
 3.7 %
Decoupled13,110
 12,076
 8.6% 4,674
 4,828
 (3.2)% 7,118
 7,257
 (1.9)%
Special Contracts (3)
N/A
 N/A
 N/A
 684
 1,147
 (40.4)% N/A
 N/A
 N/A
Total - Decoupled and
Special Contracts
13,110
 12,076
 8.6% 5,358
 5,975
 (10.3)% 7,118
 7,257
 (1.9)%
Total Sales Volumes15,316
 14,096
 8.7% 11,342
 11,525
 (1.6)% 7,850
 7,963
 (1.4)%
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 
Increase/
(Decrease)
 Percent 2017 2016 
Increase/
(Decrease)
 Percent
Electric               
Traditional7,545
 8,131
 (586) (7.2)% 21,040
 21,731
 (691) (3.2)%
Decoupled6,551
 7,213
 (662) (9.2) 18,391
 19,235
 (844) (4.4)
Total Electric14,096
 15,344
 (1,248) (8.1) 39,431
 40,966
 (1,535) (3.7)
                
Firm Natural Gas     
        
  
Traditional5,550
 5,270
 280
 5.3
 32,233
 31,570
 663
 2.1
Decoupled and Special Contracts5,975
 5,653
 322
 5.7
 37,453
 36,537
 916
 2.5
Total Firm Natural Gas11,525
 10,923
 602
 5.5 % 69,686
 68,107
 1,579
 2.3 %
Nine Months Ended September 30:                 
Traditional7,857
 7,542
 4.2% 35,745
 32,233
 10.9 % 1,684
 1,608
 4.7 %
Decoupled32,814
 31,889
 2.9% 35,358
 33,958
 4.1 % 16,491
 17,084
 (3.5)%
Special Contracts (3)
N/A
 N/A
 N/A
 2,222
 3,495
 (36.4)% N/A
 N/A
 N/A
Total - Decoupled and
Special Contracts
32,814
 31,889
 2.9% 37,580
 37,453
 0.3 % 16,491
 17,084
 (3.5)%
Total Sales Volumes40,671
 39,431
 3.1% 73,325
 69,686
 5.2 % 18,175
 18,692
 (2.8)%



(1)
In 2017 and in the month of January 2018, NSTAR Electric operated under two different rate structures (traditional and decoupled) based on its service territory geography. Effective February 1, 2018, NSTAR Electric operated entirely under a decoupled rate structure. The 2017 sales volumes for NSTAR Electric have been recast to present February through September 2017 as decoupled, to conform to the 2018 presentation for comparative purposes.

(2)
Eversource acquired its water distribution business on December 4, 2017. Prior year sales volumes have been presented for comparative purposes.

(3)
Special contracts are unique to Yankee Gas natural gas distribution customers who take service under such an arrangement and generally specify the amount of distribution revenue to be paid to Yankee Gas regardless of the customers' usage.

Fluctuations in retail electric sales volumes at PSNH and natural gas sales volumes at Yankee Gas impact earnings ("Traditional" in the table above).  For CL&P, NSTAR Electric (effective February 1, 2018, as a result of the DPU-approved rate case decision) and NSTAR Gas, fluctuations in retail sales volumes do not impact earnings due to their respective regulatory commission-approved distribution revenue decoupling mechanisms ("Decoupled" in the table above). Fluctuations in water sales volumes largely do not impact earnings as our Connecticut water distribution business is decoupled.

CL&P and NSTAR Electric reconcile their annual base distribution rate recovery amounts to their respective pre-established levels of baseline distribution delivery service revenues of approximately $1.1 billion (effective May 1, 2018) and $947 million, respectively. Any difference between the allowed level of distribution revenue and the actual amount realized during a 12-month period is adjusted through rates in the following period.

Three Months Ended:
Operating Revenues, which primarily consist of base electric and natural gas distribution revenues and tracked revenues further described below, decreased by $51.2increased $282.9 million for the three months ended September 30, 2017,2018, as compared to the same period in 2016.  2017.  

Base Electric and Natural Gas Distribution Revenues:

Electric distribution revenues increased $9.7 million due primarily to CL&P's base distribution rate increase as a result of the PURA-approved rate case settlement that became effective May 1, 2018 (a portion of which did not impact earnings) and an increase in non-decoupled sales volumes driven by warmer summer weather in 2018. The increase in revenues was partially offset by lower base distribution rates at NSTAR Electric, as per the DPU-approved rate case decision that became effective February 1, 2018. NSTAR Electric's rates were adjusted to reflect the new lower federal corporate income tax rate and the movement of certain costs from base distribution rates to fully-reconciled cost tracking mechanisms (most of which did not impact earnings).

Electric distribution revenues decreased $3.1 million due to the liability established to reflect the difference between the 35 percent federal corporate income tax rate included in rates charged to customers and the 21 percent federal corporate income tax rate, effective January 1, 2018 as a result of the Tax Cuts and Jobs Act. Effective February 1, 2018 for NSTAR Electric and May 1, 2018 for CL&P, rates charged to customers have been adjusted to reflect the new federal corporate income tax rate.

Base natural gas distribution revenues increased $1.1 million due primarily to an increase in demand revenues. The increase in revenues was more than offset by a $3.5 million decrease due to the liability established to reflect the impact of the reduction in federal corporate income tax rates, effective January 1, 2018. Effective July 1, 2018 for NSTAR Gas, rates charged to customers have been adjusted to reflect the new federal corporate income tax rate.

BaseTracked Electric and Natural Gas Distribution Revenues: Tracked revenues consist of certain costs that are recovered from customers in rates through regulatory commission-approved cost tracking mechanisms and therefore, have no impact on earnings.  Costs recovered through cost tracking mechanisms include energy supply procurement and other energy-related costs for our electric and natural gas distributioncustomers, retail transmission charges, energy efficiency program costs, net metering for distributed generation, and restructuring and stranded cost recovery revenues (including securitized RRB charges). In addition, tracked revenues include certain incentives earned and carrying charges that are billed in rates to customers.:  Base

Tracked electric distribution segment revenues excluding LBR, decreased $21.0increased as a result of an increase in electric energy supply costs ($97.4 million), driven by increased average retail prices. In addition, there was an increase in stranded cost recovery revenues ($31.7 million) and an increase in retail electric transmission charges ($24.6 million).

Tracked natural gas distribution revenues increased as a result of an increase in natural gas supply costs ($3.0 million).

Water: Water operating revenues totaled $63.5 million for the three months ended September 30, 2017,2018 as a result of the acquisition of Aquarion on December 4, 2017.

Electric Transmission Revenues:  The electric transmission segment revenues increased $2.1 million due to an increase related to ongoing investments in our transmission infrastructure, partially offset by lower revenue requirements primarily related to the lower federal corporate income tax rate that was reflected in 2018 transmission revenues.



Nine Months Ended: Operating Revenues, which primarily consist of base distribution revenues and tracked revenues further described below, increased $556.7 million for the nine months ended September 30, 2018, as compared to the same period in 2016,2017.  

Base Electric and Natural Gas Distribution Revenues:

Electric distribution revenues decreased $39.6 million due primarily to a decrease in sales volumes and lower demand revenues driven by the mild summer weather during the third quarter of 2017base distribution rates at NSTAR Electric, as per the DPU-approved rate case decision that became effective February 1, 2018. NSTAR Electric's rates were adjusted to reflect the new lower federal corporate income tax rate and the movement of certain costs from base distribution rates to fully-reconciled cost tracking mechanisms (most of which did not impact earnings). The decrease in revenues was partially offset by CL&P's base distribution rate increase as a result of the PURA-approved rate case settlement that became effective May 1, 2018 (a portion of which did not impact earnings), and an increase in non-decoupled sales volumes primarily driven by colder weather in January 2018 at NSTAR Electric (prior to its decoupled rate structure) and warmer summer weather in 2018 at PSNH. LBR increased $1.5Effective February 1, 2018, NSTAR Electric operated entirely under a decoupled rate structure.

Electric distribution revenues also decreased $29.5 million for the three months ended September 30, 2017, as compareddue to the same periodliability established to reflect the difference between the 35 percent federal corporate income tax rate included in 2016. rates charged to customers and the 21 percent federal corporate income tax rate, effective January 1, 2018 as a result of the Tax Cuts and Jobs Act. Effective February 1, 2018 for NSTAR Electric and May 1, 2018 for CL&P, rates charged to customers have been adjusted to reflect the new federal corporate income tax rate.

Base natural gas distribution revenues remained relatively unchanged for the three months ended September 30, 2017, as comparedincreased $10.7 million due primarily to the same periodan increase in 2016.

Fluctuations in CL&P's, WMECO's and NSTAR Gas' sales volumes do not impact the level of base distribution revenue realized or earnings due to their respective regulatory commission approved revenue decoupling mechanisms.  The revenue decoupling mechanisms permit recovery of a base amount of distribution revenues and break the relationship between sales volumes and demand revenues recognized.  Revenue decoupling mechanisms resultdriven by colder January and April weather in Connecticut in 2018, as well as growth in new customer base. The increase in revenues was more than offset by an $11.5 million decrease due to the recoveryliability established to reflect the impact of our approved base distribution revenue requirements.  the reduction in federal corporate income tax rates, effective January 1, 2018. Effective July 1, 2018 for NSTAR Gas, rates charged to customers have been adjusted to reflect the new federal corporate income tax rate.

Tracked distribution revenues:Electric and Natural Gas Distribution Revenues: Tracked revenues consist of certain costs that are recovered from customers in rates through regulatory commission-approved cost tracking mechanisms and therefore, have no impact on earnings.  Costs recovered through cost tracking mechanisms include energy supply procurement costs and other energy-related costs for our electric and natural gas customers, retail transmission charges, energy efficiency program costs, net metering for distributed generation, and restructuring and stranded cost recovery revenues.revenues (including securitized RRB charges). In addition, certain tracked revenues include certain incentives earned and carrying charges that are billed in rates to customers.

Tracked electric distribution revenues increased as a result of an increase in electric energy supply costs ($234.1 million), driven by increased average retail prices. In addition, there was an increase in stranded cost recovery revenues ($49.9 million) and an increase in retail electric transmission charges ($57.4 million).

Tracked natural gas distribution segment revenues increased as a result of an increase in natural gas supply costs ($7.636.6 million) and an increase in energy efficiency program revenues ($2.24.6 million). Tracked electric distribution

Water: Water operating revenues decreasedtotaled $161.5 million for the nine months ended September 30, 2018 as a result of a decrease in retail electric transmission charges ($39.8 million), a decrease in stranded cost recovery revenues ($16.9 million), a decrease in energy efficiency program revenues ($13.9 million) and a decrease in pension rate adjustment mechanisms ($7.1 million). Partially offsetting these decreases were increases in tracked electric distribution revenues related to electric energy supply costs ($7.3 million), revenues related to renewable energy requirements ($10.8 million), net metering revenues ($7.0 million) and federally-mandated congestion charges ($2.8 million).the acquisition of Aquarion on December 4, 2017.

Electric transmission revenues:Transmission Revenues:  The electric transmission segment revenues increased by $21.7decreased $17.0 million due to lower revenue requirements primarily related to the recovery of higher revenue requirements associated withlower federal corporate income tax rate that was reflected in 2018 transmission revenues, partially offset by an increase related to ongoing investments in our transmission infrastructure.

Other: Other revenues decreased due primarily to the sale of Eversource's unregulated telecommunication business on December 31, 2016 ($5.0 million).

Nine Months Ended:
Operating Revenues decreased by $6.0 million for the nine months ended September 30, 2017, as compared to the same period in 2016.  

Base electric and natural gas distribution revenues:  Base electric distribution segment revenues, excluding LBR, decreased $13.2 million for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to a decrease in sales volumes driven by the mild summer weather during the third quarter of 2017 at NSTAR Electric and PSNH. LBR increased $10.6 million for the nine months ended September 30, 2017, as compared to the same period in 2016. 

Base natural gas distribution revenues remained relatively unchanged for the nine months ended September 30, 2017, as compared to the same period in 2016. The impact of higher firm natural gas sales volumes was offset by lower demand revenues in Connecticut driven by lower peak usage in 2017, as compared to 2016.

Tracked distribution revenues: Tracked natural gas distribution segment revenues increased as a result of an increase in natural gas supply costs ($57.8 million) and an increase in energy efficiency program revenues ($17.1 million). Tracked electric distribution revenues decreased as a result of a decrease in electric energy supply costs ($81.0 million), driven by decreased average retail prices and lower sales volumes, a decrease in retail electric transmission charges ($45.9 million), a decrease in transition and stranded cost recovery revenues ($33.1 million), a decrease in pension rate adjustment mechanisms ($16.2 million), and a decrease in energy efficiency program revenues ($8.8 million). Partially offsetting these decreases were increases in tracked electric distribution revenues related to federally-mandated congestion charges ($23.0 million), net metering revenues ($22.4 million) and revenues related to renewable energy requirements and the sale of PSNH's RECs ($14.7 million).

Electric transmission revenues:  The electric transmission segment revenues increased by $77.5 million due primarily to the recovery of higher revenue requirements associated with ongoing investments in our transmission infrastructure.

Other: Other revenues decreased due primarily to the sale of Eversource's unregulated telecommunication business on December 31, 2016 ($15.0 million).



Purchased Power, Fuel and Transmissionexpense includes costs associated with purchasing electricity, and natural gas and water, on behalf of our customers.  These energy supply costs are recovered from customers in rates through commission-approved cost tracking mechanisms, which have no impact on earnings (tracked costs).  Total Purchased Power, Fuel and Transmission expense decreasedincreased for the three and nine months ended September 30, 2017,2018, as compared to the same periods in 2016,2017, due primarily to the following:
(Millions of Dollars)Three Months Ended Increase/(Decrease) Nine Months Ended
Increase/(Decrease)
Three Months Ended Nine Months Ended
Electric Distribution$(0.4) $(109.1)$145.8
 $338.4
Natural Gas Distribution7.0
 50.1
2.9
 31.0
Transmission(20.6) 12.2
36.3
 79.0
Water Distribution0.4
 1.1
Eliminations5.1
 38.4
Total Purchased Power, Fuel and Transmission$(14.0) $(46.8)$190.5
 $487.9



The decreasevariance in electric distribution reflects intercompany transmission charges in both periods. The increase in purchased power expense at the electric distribution business for the three and nine months ended September 30, 2017,2018, as compared to the same periodperiods in 2016,2017, was driven primarily by lowerhigher prices associated with the procurement of energy supplysupply. As a result of the sale of PSNH's thermal generation assets on January 10, 2018, and lower sales volumes.the sale of PSNH's hydroelectric assets on August 26, 2018, PSNH purchased power in place of its self-generation output in the first nine months of 2018. The increase in purchased power expensenatural gas supply costs at theour natural gas distribution business for each of the periods presented was due to higher average natural gas prices and higher sales volumes.

The decreaseincrease in transmission costs for the three and nine months ended September 30, 2017,2018, as compared to the same periodperiods in 2016,2017, was primarily the result of a decreasean increase in costs billed by ISO-NE that support regional grid investment, and an increase in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers. The increaseThis was partially offset by a decrease in transmission costs for the nine months ended September 30, 2017, as compared to the same period in 2016, was primarily the result of an increase in costs billed by ISO-NE that support regional grid investment, and Local Network Service charges, which reflect the cost of transmission service provided by Eversource over our local transmission network. This was partially offset by a decrease in the retail transmission cost deferral.

Operations and Maintenance expense includes tracked costs and costs that are part of base electric, and natural gas and water distribution rates with changes impacting earnings (non-tracked costs).  Operations and Maintenance expense decreasedincreased/(decreased) for the three and nine months ended September 30, 2017,2018, as compared to the same periods in 2016,2017, due primarily to the following:
(Millions of Dollars)Three Months Ended Increase/(Decrease) 
Nine Months Ended
Increase/(Decrease)
Three Months
Ended
 
Nine Months
Ended
Base Electric Distribution:   
Base Electric Distribution (Non-Tracked Costs):   
Employee-related expenses, including labor and benefits$(15.0) $(46.2)$26.4
 $30.7
Bad debt expense(2.6) (15.3)2.6
 13.6
Shared corporate costs (including computer software depreciation at Eversource Service)5.4
 15.0
(8.8) 1.1
Storm restoration costs(4.0) 3.1
(3.3) (11.4)
Boston Harbor civil action settlement charge recorded in the second quarter of 2017
 4.9
Other operations and maintenance9.1
 15.7
Total Base Electric Distribution(7.1) (22.8)
Total Base Natural Gas Distribution:   
Shared corporate costs (including computer software depreciation at Eversource Service)1.2
 3.6
Other operations and maintenance(4.1) (1.5)
Total Base Natural Gas Distribution(2.9) 2.1
Total Tracked costs (Electric Distribution, Electric Transmission and Natural Gas Distribution)(5.5) 7.2
Operations-related expenses, including vegetation management, vehicles, and outside services (excluding storm restoration costs)(1.8) (12.9)
Other non-tracked operations and maintenance5.1

5.7
Total Base Electric Distribution (Non-Tracked Costs)20.2

26.8
Base Natural Gas Distribution (Non-Tracked Costs)3.8
 11.3
Water Distribution (Addition of Aquarion operations and maintenance expenses due to acquisition on December 4, 2017)20.5
 59.4
Tracked Costs (Electric Distribution, Electric Transmission and Natural Gas Distribution) - Decrease primarily due to lower PSNH generation operations expenses due to the 2018 sales of thermal and hydroelectric generation assets and lower transmission expenses(16.5)
(78.2)
Other and eliminations:      
Eversource Parent and Other Companies(1.1) 0.8
Eversource Parent and Other Companies - other operations and maintenance(1.2) (1.1)
Eliminations(7.7) (19.5)10.0
 (3.6)
Total Operations and Maintenance$(24.3) $(32.2)$36.8

$14.6

Depreciation expense increased for the three and nine months ended September 30, 2017,2018, as compared to the same periods in 2016,2017, due primarily to higher utilitynet plant in service balances.balances and new depreciation rates effective with the CL&P distribution rate case settlement agreement. Partially offsetting these increases was lower depreciation expense at PSNH as a result of the sale of the thermal and hydroelectric generation assets in 2018.

Amortization of Regulatory Assets, Net expense includes the deferral of energy supply and energy-related costs included in certain regulatory-approvedcommission-approved cost tracking mechanisms, and the amortization of certain costs.  TheThis deferral adjusts expense to match the corresponding revenues. Amortization of Regulatory Assets, Net, decreasedincreased for the three months ended September 30, 2017 and increased for the nine months ended September 30, 2017,2018, as compared to the same periods in 2016,2017, due primarily to the deferral of energy supply and energy-related costs, which can fluctuate from period to period based on the timing of costs incurred and the related rate changes to recover these costs. Energy supply and energy-related costs atare recovered from customers in rates and have no impact on earnings.  

Energy Efficiency Programs expense decreased for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to a State of Connecticut policy change requiring CL&P NSTAR Electric, PSNHto remit 2018 energy efficiency funds to the State of Connecticut. For the three and WMECO, which arenine months ended September 30, 2018, these amounts totaled $10.7 million and $36.1 million, respectively. These costs were collected from CL&P's customers and remitted to the primary drivers in amortization,State of Connecticut; as such we have classified these amounts as Taxes Other than Income Taxes. The costs for the majority of the state energy policy initiatives and expanded energy efficiency programs are recovered from customers in rates and have no impact on earnings.

Energy Efficiency Programs Taxes Other Than Income Taxesexpense decreasedincreased for the three and nine months ended September 30, 2017,2018, as compared to the same periods in 2016,2017, due primarily to deferral adjustments ata State of Connecticut policy change requiring CL&P NSTAR Electric and WMECO, partially offset by deferral adjustments at the natural gas businesses, which reflect the actual costs ofto remit 2018 energy efficiency programs comparedfunds to the estimated amounts billedState of Connecticut (which totaled $10.7 million and $36.1 million for the three and nine months ended September 30, 2018, respectively), as well as higher property taxes due to customers. The deferral adjusts costs incurred to match energy efficiency revenue billed to customers and the timing of the recovery of energy efficiency costs. The costs for various state policy initiatives are recovered from customershigher utility plant in rates and have no impact on earnings.service balances.



Interest Expense increased for the three and nine months ended September 30, 2017,2018, as compared to the same periodsperiod in 2016,2017, due primarily to higheran increase in interest on long-term debt ($5.8 million and $15.9 million, respectively)5.9 million) as a result of new debt issuances, the addition of Aquarion interest in 2018 ($6.4 million), interest expense on the 2018 RRB issuance ($6.0 million) and higheran increase in interest on short-term borrowings ($2.7 million), partially offset by higher AFUDC related to debt funds ($1.9 million) and a decrease in regulatory deferrals, primarily at NSTAR Electric, which decreased interest expense ($1.3 million).

Interest Expense increased for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to an increase in interest on long-term debt ($2.4 million29.0 million) as a result of new debt issuances, the addition of Aquarion interest in 2018 ($19.2 million), interest expense on the 2018 RRB issuance ($8.8 million) and $4.8 million, respectively)an increase in interest on short-term borrowings ($6.5 million), partially offset by higher AFUDC related to debt funds ($5.9 million) and a decrease in regulatory deferrals, primarily at NSTAR Electric, which decreased interest expense ($3.3 million).

Other Income, Net increaseddecreased for the three and nine months ended September 30, 2017,2018, as compared to the same periodsperiod in 2016,2017, due primarily to increased gains on investments ($4.2 million and $24.9 million, respectively), primarilya decrease in equity in earnings of unconsolidated affiliates related to Eversource's investmentequity investments ($33.0 million) and changes in a renewable energy fund,the market value changes related to the deferred compensation plans ($2.93.6 million). In the third quarter of 2018, Eversource recognized a $32.9 million and $5.1 million, respectively) andother-than-temporary impairment to our equity method investment in the Access Northeast project, which was reflected as a loss within equity in earnings. These decreases were partially offset by higher AFUDC related to equity funds ($1.22.8 million), the recognition of $8.7 million of the equity return component of the carrying charges related to storms incurred from August 2011 through March 2013 at PSNH, an increase related to pension, SERP and $5.0PBOP non-service income components ($7.5 million) and gains on the sale of property ($5.0 million).

Other Income, Net increased for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to higher AFUDC related to equity funds ($8.8 million), the recognition of $8.7 million respectively)of the equity return component of the carrying charges related to storms incurred from August 2011 through March 2013 at PSNH, an increase related to pension, SERP and PBOP non-service income components ($21.7 million) and gains on the sale of property ($5.0 million). Partially offsetting these increases was a decrease in equity in earnings of unconsolidated affiliates related to Eversource's equity investments ($23.4 million), driven by a $32.9 million other-than-temporary impairment to our equity method investment in the Access Northeast project. The equity in earnings decrease was partially offset by increased unrealized gains on our investment in a renewable energy fund.

Income Tax Expense decreased for the three months ended September 30, 2017,2018, as compared to the same period in 2016,2017, due primarily to the new federal tax law enacted December 22, 2017, the Tax Cuts and Jobs Act, reducing the federal corporate income tax rate from 35 percent to 21 percent and lower pre-tax earnings ($2.463.5 million), partially offset by higher state taxes ($1.2 million). Income tax expense was further decreased by the impairment of Access Northeast ($6.9 million), return to provision items ($1.2 million), and an aggregate benefit relating to both federal tax reform impacts on the tax return compared to the provision estimate and remeasurement of a tax reserve based on new information from a change in Connecticut tax law ($18.0 million), all partially offset by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($1.21.8 million).

Income Tax Expensedecreased for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to a reduction in the federal corporate income tax rate from 35 percent to 21 percent and lower pre-tax earnings ($198.9 million) and by the impairment of Access Northeast ($6.9 million). Income tax expense was further decreased by return to provision items ($1.2 million), an aggregate benefit relating to both federal tax reform impacts on the tax return compared to the provision estimate and remeasurement of a tax reserve based on new information from a change in Connecticut tax law ($18.0 million), and by flow-through items and permanent differences ($2.4 million).





RESULTS OF OPERATIONS –
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

The following provides the amounts and variances in operating revenues and expense line items in the statements of income for CL&P, NSTAR Electric and PSNH for the nine months ended September 30, 2018 and 2017 included in this combined Quarterly Report on Form 10-Q:
 For the Nine Months Ended September 30,
 CL&P NSTAR Electric PSNH
(Millions of Dollars)2018 2017 Increase/
(Decrease)
 2018 2017 
Increase/
(Decrease)
 2018 2017 
Increase/
(Decrease)
Operating Revenues$2,344.9
 $2,173.6
 $171.3
 $2,400.3
 $2,290.4
 $109.9
 $792.7
 $733.6
 $59.1
Operating Expenses: 
  
  
      
      
Purchased Power, Fuel and Transmission850.8
 711.2
 139.6
 981.9
 799.0
 182.9
 294.0
 179.3
 114.7
Operations and Maintenance355.5
 361.1
 (5.6) 344.5
 346.5
 (2.0) 153.3
 195.6
 (42.3)
Depreciation208.9
 184.3
 24.6
 205.2
 204.4
 0.8
 69.5
 95.3
 (25.8)
Amortization of Regulatory Assets/(Liabilities), Net97.4
 58.8
 38.6
 35.5
 17.2
 18.3
 41.3
 (10.7) 52.0
Energy Efficiency Programs71.6
 106.5
 (34.9) 229.4
 228.5
 0.9
 15.7
 11.0
 4.7
Taxes Other Than Income Taxes267.7
 223.4
 44.3
 145.7
 130.6
 15.1
 59.8
 67.0
 (7.2)
Total Operating Expenses1,851.9
 1,645.3
 206.6
 1,942.2
 1,726.2
 216.0
 633.6
 537.5
 96.1
Operating Income493.0
 528.3
 (35.3) 458.1
 564.2
 (106.1) 159.1
 196.1
 (37.0)
Interest Expense113.1
 106.6
 6.5
 80.8
 88.7
 (7.9) 44.0
 38.7
 5.3
Other Income, Net20.7
 15.4
 5.3
 40.6
 24.6
 16.0
 24.3
 7.3
 17.0
Income Before Income Tax Expense400.6
 437.1
 (36.5) 417.9
 500.1
 (82.2) 139.4
 164.7
 (25.3)
Income Tax Expense102.0
 159.5
 (57.5) 112.2
 196.0
 (83.8) 37.9
 65.1
 (27.2)
Net Income$298.6
 $277.6
 $21.0
 $305.7
 $304.1
 $1.6
 $101.5
 $99.6
 $1.9

Operating Revenues
Sales Volumes: A summary of our retail electric GWh sales volumes was as follows:
 For the Nine Months Ended September 30,
 2018 2017 Increase Percent
CL&P16,376
 15,812
 564
 3.6%
NSTAR Electric18,314
 17,784
 530
 3.0%
PSNH5,981
 5,835
 146
 2.5%

Fluctuations in retail electric sales volumes at PSNH impact earnings.  For CL&P and NSTAR Electric (effective February 1, 2018, as a result of the DPU-approved rate case decision), fluctuations in retail electric sales volumes do not impact earnings due to their respective regulatory commission-approved distribution revenue decoupling mechanisms.

CL&P and NSTAR Electric reconcile their annual base distribution rate recovery amounts to their respective pre-established levels of baseline distribution delivery service revenues of approximately $1.1 billion (effective May 1, 2018) and $947 million, respectively. Any difference between the allowed level of distribution revenue and the actual amount realized during a 12-month period is adjusted through rates in the following period.

Operating Revenues: Operating Revenues, which consist of base distribution revenues and tracked revenues further described below, increased for the nine months ended September 30, 2017,2018, as compared to the same period in 2016,2017, as follows:
(Millions of Dollars)CL&P NSTAR Electric PSNH
Operating Revenues$171.3
 $109.9
 $59.1



Base Distribution Revenues:

CL&P's distribution revenues increased $17.0 million due primarily to the impact of its base distribution rate increase as a result of the PURA-approved rate case settlement that became effective May 1, 2018 (a portion of which did not impact earnings).
NSTAR Electric's distribution revenues decreased $60.9 million due primarily to lower base distribution rates at NSTAR Electric, as per the DPU-approved rate case decision that became effective February 1, 2018. NSTAR Electric's rates were adjusted to reflect the new lower federal corporate income tax rate and the movement of certain costs from base distribution rates to fully-reconciled cost tracking mechanisms (most of which did not impact earnings). The decrease in revenues was partially offset by an increase in January 2018 sales volumes, as compared to January 2017, primarily driven by the colder weather. Effective February 1, 2018, NSTAR Electric operated entirely under a decoupled rate structure, and changes in sales volumes no longer impact earnings.
PSNH's base distribution revenues increased $4.3 million primarily as a result of an increase in sales volumes in 2018, partially offset by a rate change due to the completion of the full recovery of certain costs in revenues. The rate change did not impact earnings.
Distribution revenues decreased $16.6 million at CL&P, $3.7 million at NSTAR Electric and $9.2 million at PSNH due to the liability established to reflect the difference between the 35 percent federal corporate income tax rate included in rates charged to customers and the 21 percent federal corporate income tax rate, effective January 1, 2018 as a result of the Tax Cuts and Jobs Act. Effective February 1, 2018 for NSTAR Electric and May 1, 2018 for CL&P, rates charged to customers have been adjusted to reflect the new federal corporate income tax rate.

Tracked Revenues: Tracked revenues consist of certain costs that are recovered from customers in rates through commission-approved cost tracking mechanisms and therefore have no impact on earnings.  Costs recovered through cost tracking mechanisms include energy supply procurement and other energy-related costs, retail transmission charges, energy efficiency program costs, net metering for distributed generation and restructuring and stranded cost recovery revenues (including securitized RRB charges).  In addition, tracked revenues include certain incentives earned and carrying charges that are billed in rates to customers. Tracked revenues increased/(decreased) for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to the following:
(Millions of Dollars)CL&P NSTAR Electric PSNH
Energy supply procurement$156.3
 $80.6
 $(2.8)
Retail transmission(5.1) 62.2
 0.3
Stranded cost recovery2.3
 (17.0) 64.6
Other distribution tracking mechanisms2.0
 45.0
 6.7

Transmission Revenues: Transmission revenues decreased $8.4 million and $13.4 million at CL&P and NSTAR Electric, respectively, due to lower revenue requirements primarily related to the lower federal corporate income tax rate that was reflected in 2018 transmission revenues, partially offset by an increase related to ongoing investments in our transmission infrastructure.

Purchased Power, Fuel and Transmission expense includes costs associated with purchasing electricity on behalf of CL&P, NSTAR Electric and PSNH's customers.  These energy supply costs are recovered from customers in commission-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power, Fuel and Transmission expense increased/(decreased) for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to the following:
(Millions of Dollars)CL&P NSTAR Electric PSNH
Purchased Power Costs$121.0
 $107.5
 $109.9
Transmission Costs9.5
 62.1
 7.4
Eliminations9.1
 13.3
 (2.6)
Total Purchased Power, Fuel and Transmission$139.6
 $182.9
 $114.7

Purchased Power Costs: Included in purchased power costs are the costs associated with providing electric generation service supply to all customers who have not migrated to third party suppliers.

The increase at CL&P was due primarily to an increase in the price and volume of power procured on behalf of our customers.
The increase at NSTAR Electric was due primarily to an increase in the price of power procured on behalf of our customers.
The increase at PSNH was due primarily to higher pre-taxpurchased power energy expenses that are recovered as a component of the Energy Service tracking mechanism. As a result of the sale of its thermal generation assets on January 10, 2018 and its hydroelectric generation assets on August 26, 2018, PSNH purchased power in place of its self-generation output in the first nine months of 2018.

Transmission Costs: Included in transmission costs are charges that recover the cost of transporting electricity over high-voltage lines from generating plants to substations, including costs allocated by ISO-NE to maintain the wholesale electric market. The increase in transmission costs at CL&P, NSTAR Electric and PSNH was primarily the result of an increase in costs billed by ISO-NE that support regional grid investment and an increase in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers. This was partially offset by a decrease in Local Network Service charges, which reflect the cost of transmission service.



Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings ($20.6 million)(non-tracked costs).  Operations and Maintenance expense increased/(decreased) for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to the following:
(Millions of Dollars)CL&P NSTAR Electric PSNH
Base Electric Distribution (Non-Tracked Costs):     
Employee-related expenses, including labor and benefits$16.7
 $11.5
 $2.5
Bad debt expense6.6
 7.1
 (0.1)
Storm restoration costs(10.5) 0.1
 (1.0)
Operations-related expenses, including vegetation management, vehicles, and outside services (excluding storm restoration costs)(9.0) (0.4) (3.5)
Other non-tracked operations and maintenance(2.1) 9.7
 (0.8)
Total Base Electric Distribution (Non-Tracked Costs)1.7
 28.0
 (2.9)
Tracked Costs:     
Decrease of PSNH generation operations expenses due to the 2018 sales of thermal and hydroelectric generation assets
 
 (36.3)
Transmission expenses(9.8) (10.2) (1.7)
Other tracked operations and maintenance2.5
 (19.8) (1.4)
Total Tracked Costs(7.3) (30.0) (39.4)
Total Operations and Maintenance$(5.6) $(2.0) $(42.3)

Depreciation increased/(decreased) for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to the following:

The increase at CL&P was due primarily to higher net plant in service balances and the implementation of new depreciation rates effective with the CL&P distribution rate case settlement agreement.  
The increase at NSTAR Electric was due to higher net plant in service balances, offset by lower depreciation composite rates.
The decrease at PSNH was due to the sale of the thermal and hydroelectric generation assets in 2018.

Amortization of Regulatory Assets/(Liabilities), Net expense includes the deferral of energy supply and energy-related costs included in certain regulatory-approved cost tracking mechanisms, and the amortization of certain costs. This deferral adjusts expense to match the corresponding revenues. Amortization of Regulatory Assets/(Liabilities), Net increased at CL&P, NSTAR Electric and PSNH for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to the deferral adjustment of energy supply and energy-related costs, which can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs. In addition, the increase at PSNH includes amortization of the securitized asset rate reduction bonds in 2018. Energy supply and energy-related costs, which are the primary drivers of amortization, are recovered from customers in rates and have no impact on earnings.  

Energy Efficiency Programs expenseincludes costs for various state energy policy initiatives and expanded energy efficiency programs, the majority of which are recovered from customers in rates and have no impact on earnings. Energy Efficiency Programs expenseincreased/(decreased) for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to the following:

The decrease at CL&P was due primarily to a State of Connecticut policy change requiring CL&P to remit 2018 energy efficiency funds to the State of Connecticut. In the first nine months of 2018, this amount totaled $36.1 million. These costs were collected from CL&P's customers and remitted to the State of Connecticut; as such we have classified this amount as Taxes Other than Income Taxes.
The increase at PSNH was due to the deferral adjustment, which reflects the actual costs of energy efficiency programs compared to the estimated amounts billed to customers and the timing of the recovery of energy efficiency costs.

Taxes Other Than Income Taxes increased/(decreased) for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to the following:

The increase at CL&P was due primarily to a State of Connecticut policy change requiring CL&P to remit 2018 energy efficiency funds to the State of Connecticut (which totaled $36.1 million for the first nine months of 2018), as well as higher property taxes due to higher utility plant balances and higher gross earnings taxes (the costs of which are tracked).
The increase at NSTAR Electric was due primarily to higher property taxes due to higher utility plant balances.
The decrease at PSNH was due primarily to the absence of property taxes as a tax creditresult of the sales of its thermal and hydroelectric generation assets in 2018, and a 2018 refund of disputed property taxes for prior years from the Town of Bow, New Hampshire, partially offset by higher property taxes due to higher utility distribution plant balances.



Interest Expense increased/(decreased) for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to the following:

The increase at CL&P was due primarily to higher interest on long-term debt as a result of new debt issuances ($2.45.9 million),.
The decrease at NSTAR Electric wasdue primarily to a decrease in regulatory deferrals, which decreased interest expense ($5.6 million) and higher state taxeslower interest on long-term debt ($1.34.3 million), partially offset by an increase in interest expense on short-term borrowings
($3.3 million).
The increase at PSNH was due primarily to interest on RRBs ($8.8 million) and higher interest on short-term borrowings ($1.2 million), partially offset by lower interest on long-term debt ($4.8 million).

Other Income, Net increased for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to the following:

The increase at CL&P was due to an increase related to pension, SERP and PBOP non-service income components ($6.0 million) and higher AFUDC related to equity funds ($1.2 million).
The increase at NSTAR Electric was due to an increase related to pension, SERP and PBOP non-service income components ($12.3 million) and higher AFUDC related to equity funds ($4.8 million), partially offset by amounts related to officer's life insurance policies ($1.5 million).
The increase at PSNH was due to the recognition of $8.7 million of the equity return component of the carrying charges related to storms incurred from August 2011 through March 2013, a gain on the sale of property ($4.4 million), interest income primarily related to a 2018 refund of disputed property taxes for prior years ($2.6 million), and an increase related to pension, SERP and PBOP non-service income components ($1.9 million).

Income Tax Expense decreased for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to the following:

The decrease at CL&P was due primarily to the new federal tax law enacted December 22, 2017, the Tax Cuts and Jobs Act, reducing the federal corporate income tax rate from 35 percent to 21 percent and lower pre-tax earnings ($68.9 million) and state taxes ($5.4 million). This decrease was partially offset by return to provision items ($11.1 million) and by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($5.7 million).
The decrease at NSTAR Electric was due primarily to a reduction in the federal corporate tax rate and lower pre-tax earnings ($87.3 million), partially offset by return to provision items ($1.2 million) and by flow-through items and permanent differences ($4.62.3 million).
The decrease at PSNH was due primarily to a reduction in the federal corporate income tax rate and lower pre-tax earnings ($28.3 million) and flow-through items and permanent differences ($1.7 million), partially offset by state taxes ($2.8 million).

EARNINGS SUMMARY

CL&P's earnings increased $21.0 millionfor the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to the impact of the CL&P base distribution rate increase effective May 1, 2018, an increase in transmission earnings driven by a higher transmission rate base, and higher non-service income from our benefit plans. Earnings were also favorably impacted by lower income tax expense, net of lower distribution revenues resulting from the Tax Cuts and Jobs Act. The earnings increase was partially offset by higher depreciation expense, higher property and other tax expense, and higher interest expense.

NSTAR Electric's earnings increased $1.6 million for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to an increase in transmission earnings driven by a higher transmission rate base, higher non-service income from our benefit plans, lower interest expense, and lower depreciation expense. Earnings were also favorably impacted by lower income tax expense, net of lower distribution revenues resulting from the Tax Cuts and Jobs Act. The earnings increase was partially offset by higher operations and maintenance expense and higher property tax expense.

PSNH's earnings increased $1.9 million for the nine months ended September 30, 2018, as compared to the same period in 2017, due primarily to an increase in transmission earnings driven by a higher transmission rate base, the recognition of carrying charges on storm costs approved for recovery, a gain on the sale of property, lower operations and maintenance expense, higher sales volumes, and lower property tax expense due to the 2018 refund of disputed property taxes for prior tax years. Earnings were also favorably impacted by lower income tax expense, net of lower distribution revenues resulting from the Tax Cuts and Jobs Act. The earnings increase was partially offset by lower generation earnings due to the sales of its thermal and hydroelectric generation assets in 2018, and higher depreciation expense.

LIQUIDITY

Cash Flows: CL&P had cash flows provided by operating activities of $451.1 million for the nine months ended September 30, 2018, as compared to $625.1 million in the same period of 2017.  The decrease in operating cash flows was due primarily to cash payments made in the first nine months of 2018 for storm restoration costs of approximately $120 million, an increase in pension contributions of $39.3 million and the timing of collections and payments related to our working capital items, including accounts receivable and accounts payable. Partially offsetting these unfavorable impacts were an increase related to the timing of cash collected for regulatory tracking mechanisms and income tax payments made in 2018 of $3.6 million, compared to income tax payments made in 2017 of $19.8 million.



NSTAR Electric had cash flows provided by operating activities of $574.3 million for the nine months ended September 30, 2018, as compared to $505.8 million in the same period of 2017.  The increase in operating cash flows was due primarily to the timing of cash collected for regulatory tracking mechanisms, a decrease of $22.6 million in Pension and PBOP contributions, and the timing of payments related to our working capital items. Partially offsetting these favorable impacts were cash payments made for storm restoration costs of approximately $93 million and income tax payments made in 2018 of $42.4 million, compared to income tax payments made in 2017 of $25.9 million.

PSNH had cash flows provided by operating activities of $217.7 million for the nine months ended September 30, 2018, as compared to $263.9 million in the same period of 2017.  The decrease in operating cash flows was due primarily to the timing of cash collected for regulatory tracking mechanisms and collections and payments of our working capital items.

For further information on CL&P's, NSTAR Electric's and PSNH's liquidity and capital resources, see "Liquidity" and "Business Development and Capital Expenditures" included in this Management's Discussion and Analysis of Financial Condition and Results of Operations.


RESULTS OF OPERATIONS – THE CONNECTICUT LIGHT AND POWER COMPANY

The following provides the amounts and variances in operating revenues and expense line items in the statements of income for CL&P for the three and nine months ended September 30, 20172018 and 20162017 included in this combined Quarterly Report on Form 10-Q:
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Millions of Dollars)2017 2016 Increase/
(Decrease)
 Percent 2017 2016 
Increase/
(Decrease)
 Percent
Operating Revenues$774.8
 $760.0
 $14.8
 1.9 % $2,173.6
 $2,175.1
 $(1.5) (0.1)%
Operating Expenses: 
  
  
  
  
  
  
  
Purchased Power and Transmission259.0
 253.5
 5.5
 2.2
 711.2
 760.6
 (49.4) (6.5)
Operations and Maintenance123.1
 123.0
 0.1
 0.1
 359.8
 356.4
 3.4
 1.0
Depreciation63.7
 57.7
 6.0
 10.4
 184.3
 172.2
 12.1
 7.0
Amortization of Regulatory Assets, Net34.6
 23.4
 11.2
 47.9
 58.8
 30.3
 28.5
 94.1
Energy Efficiency Programs37.7
 44.4
 (6.7) (15.1) 106.5
 118.0
 (11.5) (9.7)
Taxes Other Than Income Taxes79.2
 81.9
 (2.7) (3.3) 223.4
 227.9
 (4.5) (2.0)
Total Operating Expenses597.3
 583.9
 13.4
 2.3
 1,644.0
 1,665.4
 (21.4) (1.3)
Operating Income177.5
 176.1
 1.4
 0.8
 529.6
 509.7
 19.9
 3.9
Interest Expense36.3
 36.1
 0.2
 0.6
 106.6
 108.6
 (2.0) (1.8)
Other Income, Net7.5
 3.7
 3.8
 (a)
 14.1
 10.9
 3.2
 29.4
Income Before Income Tax Expense148.7
 143.7
 5.0
 3.5
 437.1
 412.0
 25.1
 6.1
Income Tax Expense52.6
 57.1
 (4.5) (7.9) 159.5
 155.4
 4.1
 2.6
Net Income$96.1
 $86.6
 $9.5
 11.0 % $277.6
 $256.6
 $21.0
 8.2 %

(a) Percent greater than 100 not shown as it is not meaningful.
 For the Three Months Ended September 30,
(Millions of Dollars)2018 2017 Increase/(Decrease)
Operating Revenues$865.0
 $774.8
 $90.2
Operating Expenses: 
  
  
Purchased Power and Transmission314.6
 259.0
 55.6
Operations and Maintenance128.5
 123.5
 5.0
Depreciation72.0
 63.7
 8.3
Amortization of Regulatory Assets, Net54.0
 34.6
 19.4
Energy Efficiency Programs30.2
 37.7
 (7.5)
Taxes Other Than Income Taxes93.0
 79.2
 13.8
Total Operating Expenses692.3
 597.7
 94.6
Operating Income172.7
 177.1
 (4.4)
Interest Expense37.6
 36.3
 1.3
Other Income, Net7.0
 7.9
 (0.9)
Income Before Income Tax Expense142.1
 148.7
 (6.6)
Income Tax Expense41.8
 52.6
 (10.8)
Net Income$100.3
 $96.1
 $4.2

Operating Revenues
Sales Volumes: A summary of CL&P's retail electric GWh sales volumes werewas as follows:
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 Decrease Percent 2017 2016 Decrease Percent
Retail Sales Volumes in GWh5,644
 6,225
 (581) (9.3)% 15,812
 16,541
 (729) (4.4)%
 For the Three Months Ended September 30,
 2018 2017 Increase Percent
CL&P6,153
 5,644
 509
 9.0%

Three Months Ended:Fluctuations in retail electric sales volumes do not impact earnings due to its PURA-approved distribution revenue decoupling mechanism.
CL&P's
Operating Revenues: Operating Revenues, which consist of base distribution revenues and tracked revenues further described below, increased by $14.8$90.2 million for the three months ended September 30, 2017,2018, as compared to the same period in 2016.2017.

Fluctuations in Base Distribution Revenues: CL&P's sales volumes dodistribution revenues increased $11.4 million due primarily to the impact of its base distribution rate increase as a result of the PURA-approved rate case settlement that became effective May 1, 2018 (a portion of which did not impact the level of base distribution revenue realized or earnings due to the PURA-approved revenue decoupling mechanism.earnings). Effective May 1, 2018, CL&P's revenue decoupling mechanism permits recoveryrates charged to customers have been adjusted to reflect the new federal corporate income tax rate of a base amount of distribution revenues ($1.059 billion annually) and breaks the relationship between sales volumes and revenues recognized.  The revenue decoupling mechanism results in the recovery of approved base distribution revenue requirements.  21 percent.

Tracked Revenues: Fluctuations in the overall level of operating revenues are primarily related to tracked revenues.  Tracked revenues consist of certain costs that are recovered from customers in rates through PURA-approved cost tracking mechanisms and therefore have no impact on earnings.  Costs recovered through cost tracking mechanisms include energy supply procurement and other energy-related costs, retail transmission charges, energy efficiency program costs, and restructuring and stranded cost recovery revenues.  In addition, certain tracked revenues include certain incentives earned and carrying charges that are billed in rates to customers. Tracked distribution revenues increased primarily as a result of an increase in energy supply costs ($27.1 million) driven by increased average retail prices. Partially offsetting this increase was a decrease in stranded cost recovery revenues ($7.6 million) and a decrease in retail transmission charges ($7.6 million).

Transmission revenues increased by $6.3 million due primarily to the recovery of higher revenue requirements associated with ongoing investments in our transmission infrastructure.

Nine Months Ended:
CL&P's Operating Revenues decreased by $1.5 millionincreased/(decreased) for the ninethree months ended September 30, 2017,2018, as compared to the same period in 2016.

Tracked distribution revenues decreased primarily as a result of a decrease in energy supply costs ($25.0 million) driven by decreased average retail prices and lower sales volumes. In addition, there was a $17.8 million decrease in stranded cost recovery revenues. Partially offsetting these decreases was an increase in federally-mandated congestion charges ($23.0 million).

Transmission revenues increased by $27.2 million2017, due primarily to higher revenue requirements associated with ongoing investments in our transmission infrastructure.the following:


(Millions of Dollars) 
Energy supply procurement$64.6
Retail transmission(9.3)
Other distribution tracking mechanisms8.9

Purchased Power and Transmission expense includes costs associated with purchasing electricity on behalf of CL&P's customers. These energy supply costs are recovered from customers in rates through PURA-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Total Purchased Power and Transmission expense increasedincreased/(decreased) for the three months ended September 30, 2017, and decreased for the nine months ended September 30, 2017,2018, as compared to the same periodsperiod in 2016,2017, due primarily to the following:
(Millions of Dollars)Three Months Ended Increase/(Decrease) 
Nine Months Ended
Increase/(Decrease)
 
Purchased Power Costs$5.7
 $(68.1)$56.8
Transmission Costs(0.2) 18.7
(3.3)
Eliminations2.1
Total Purchased Power and Transmission$5.5
 $(49.4)$55.6

Included in purchased power costs are the costs associated with CL&P's GSC, CTA and FMCC tracking mechanisms and deferred energy supply costs.  

The increase in purchased power costs for the three months ended September 30, 2017, as compared to the same period in 2016, was due primarily to GSC-related purchasedan increase in both the price and volume of power expenses. The GSC recovers energy-related costs incurred as a resultprocured on behalf of providing electric generation service supply to all customers who have not migrated to third party suppliers.our customers. The decrease in purchased power costs for the nine months ended September 30, 2017, as compared to the same period in 2016, was due primarily to a decrease in the price of standard offer supply also associated with the GSC, and lower sales volumes. The increase in transmission costs for the nine months ended September 30, 2017, as compared to the same period in 2016, was primarily the result of an increase in costs billed by ISO-NE that support regional grid investment, and Local Network Service charges, which reflect the cost of transmission service. This was partially offset by a decrease in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers.customers, and a decrease in Local Network Service charges, which reflect the cost of transmission service. This was partially offset by an increase in costs billed by ISO-NE that support regional grid investment.

Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs).  Operations and Maintenance expense increased/(decreased) for the three months ended September 30, 2018, as compared to the same period in 2017, due primarily to the following:
(Millions of Dollars) 
Base Electric Distribution (Non-Tracked Costs): 
Employee-related expenses, including labor and benefits$12.2
Storm restoration costs(6.0)
Other non-tracked operations and maintenance(0.6)
Total Base Electric Distribution (Non-Tracked Costs)5.6
Total Tracked Costs(0.6)
Total Operations and Maintenance$5.0

Depreciation expense increased for the three months ended September 30, 2017,2018, as compared to the same period in 2016, driven by a $0.4 million increase in non-tracked costs, which was primarily attributable to higher shared corporate costs, partially offset by lower employee-related expenses, lower storm restoration costs and lower vegetation management costs. The increase in non-tracked costs was partially offset by a $0.3 million decrease in tracked costs, which was primarily attributable to lower tracked system resiliency, lower bad debt expense and lower employee-related costs, partially offset by higher transmission expenses.

Operations and Maintenance expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, driven by a $6.5 million increase in tracked costs, which was primarily attributable to higher transmission expenses, partially offset by lower tracked bad debt expense. Non-tracked costs decreased $3.0 million, which was primarily attributable to lower employee-related expenses, lower bad debt expense and lower vegetation management costs, partially offset by higher shared corporate costs, higher storm restoration costs, and higher system resiliency project costs.

Depreciation expense increased for the three and nine months ended September 30, 2017, as compared to the same periods in 2016, due primarily to higher utilitynet plant in service balances.balances and the implementation of new depreciation rates effective with the CL&P distribution rate case settlement agreement. 

Amortization of Regulatory Assets, Net expense includes the deferral of energy supply and energy-related costs included in certain regulatory-approved cost tracking mechanisms, and the amortization of certain costs, which are recovered from customers in rates and have no impact on earnings.  Thecosts. This deferral adjusts expenseexpenses to match the corresponding revenues. The increaseAmortization of Regulatory Assets, Net increased at CL&P for the three and nine months ended September 30, 2017,2018, as compared to the same periodsperiod in 2016, was2017, due primarily to the fluctuationdeferral adjustment of the deferral,energy supply and energy-related costs, which can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs.

Energy Efficiency Programs expense decreased forsupply and energy-related costs, which are the three and nine months ended September 30, 2017, as compared to the same periods in 2016, due primarily to the deferral adjustment, which reflects the actual costprimary drivers of energy efficiency programs compared to the estimated amounts billed to customers and the timing of the recovery of energy efficiency costs. The deferral adjusts costs incurred to match energy efficiency revenue billed to customers. The costs for various state policy initiativesamortization, are recovered from customers in rates and have no impact on earnings.

Energy Efficiency Programs expenseincludes costs for state energy policy initiatives and expanded energy efficiency programs, the majority of which are recovered from customers in rates and have no impact on earnings. Energy Efficiency Programs expensedecreased for the three months ended September 30, 2018, as compared to the same period in 2017, due primarily to a State of Connecticut policy change requiring CL&P to remit 2018 energy efficiency funds to the State of Connecticut. For the three months ended September 30, 2018, this amount totaled $10.7 million. These costs were collected from CL&P's customers and remitted to the State of Connecticut; as such we have classified this amount as Taxes Other than Income Taxes.

Taxes Other Than Income Taxes expenseincreased decreased for the three and nine months ended September 30, 2017,2018, as compared to the same periodsperiod in 2016,2017, due primarily to a decrease in gross earnings taxes, partially offset by an increase inState of Connecticut policy change requiring CL&P to remit 2018 energy efficiency funds to the State of Connecticut (which totaled $10.7 million for the three months ended September 30, 2018), as well as higher property taxes due to higher utility plant balances. Grossbalances and higher gross earnings taxes (the costs of which are tracked costs and have no impact on earnings.tracked).

Income Tax Expense decreased for the three months ended September 30, 2017,2018, as compared to the same period in 2016,2017, due primarily to the true-up ofnew federal tax law enacted December 22, 2017, the Tax Cuts and Jobs Act, reducing the federal corporate income tax rate from 35 percent to 21 percent and lower pre-tax earnings ($22.2 million) and state taxes ($1.7 million). This decrease was partially offset by return to provision impactsitems ($4.711.1 million) and items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($1.5 million), partially offset by higher pre-tax earnings ($1.72.0 million).

Income Tax Expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to higher pre-tax earnings ($8.8 million) and higher state taxes ($2.6 million), partially offset by the true-up of the return to provision impacts ($4.7 million) and flow-through items and permanent differences ($2.6 million).



EARNINGS SUMMARY

CL&P's earnings increased $9.5$4.2 million for the three months ended September 30, 2017,2018, as compared to the same period in 2016,2017, due primarily to athe impact of the CL&P base distribution rate increase effective May 1, 2018. Earnings were also favorably impacted by lower effectiveincome tax rate, an increase in transmission earnings driven by a higher transmission rate base, and higherexpense, net of lower distribution revenues due in part to a higher rate base forresulting from the system resiliency program,Tax Cuts and Jobs Act. The earnings increase was partially offset by higher depreciation expense.

CL&P's earnings increased $21.0 million for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to an increase in transmission earnings driven by a higher transmission rate base, higher distribution revenues due in part to a higher rate base for the system resiliency program, and lower non-tracked operations and maintenance expense.  These favorable earnings impacts were partially offset by higher depreciation expense.

LIQUIDITY

Cash totaled $9.4 million as of September 30, 2017, compared with $6.6 million as of December 31, 2016.

CL&P had cash flows provided by operating activities of $623.3 million for the nine months ended September 30, 2017, as compared to $614.4 million in the same period of 2016.  The increase in operating cash flows was due primarily to the favorable impact of the timing of regulatory recoveries and the timing of collections and payments of our working capital items, including accounts receivable and accounts payable.  Partially offsetting these favorable impacts were the income tax payments of $19.8 million made in 2017, compared to the income tax refunds of $128.5 million received in 2016.

Eversource parent has a $1.45 billion commercial paper program allowing Eversource parent to issue commercial paper as a form of short-term debt, with intercompany loans to certain subsidiaries, including CL&P.  The weighted-average interest rate on the commercial paper borrowings as of September 30, 2017 and December 31, 2016 was 1.34 percent and 0.88 percent, respectively. There were no intercompany loans from Eversource parent to CL&P as of September 30, 2017.  As of December 31, 2016, there were intercompany loans from Eversource parent to CL&P of $80.1 million. Eversource parent, and certain of its subsidiaries, including CL&P, are parties to a five-year $1.45 billion revolving credit facility. The revolving credit facility terminates on September 4, 2021.  The revolving credit facility serves to backstop Eversource parent's $1.45 billion commercial paper program. There were no borrowings outstanding on the revolving credit facility as of September 30, 2017 and December 31, 2016.

In August 2017, CL&P issued $225 million of 4.30 percent 2014 Series A First and Refunding Mortgage Bonds due to mature in 2044. These bonds are part of the same series of CL&P’s existing 4.30 percent bonds that were initially issued in 2014. The aggregate outstanding principal amount for these bonds is now $475 million. The proceeds, net of issuance costs, were used to refinance short-term debt and fund capital expenditures and working capital.

In September 2017, CL&P repaid at maturity $100 million of 5.75 percent 2007 Series C First Mortgage Bonds.

Investments in Property, Plant and Equipment on the statements of cash flows do not include amounts incurred on capital projects but not yet paid, cost of removal, AFUDC related to equity funds, and the capitalized portions of pension expense.  CL&P's investments in property, plant and equipment totaled $621.9 million for the nine months ended September 30, 2017.




RESULTS OF OPERATIONS – NSTAR ELECTRIC COMPANY AND SUBSIDIARY

The following provides the amounts and variances in operating revenues and expense line items in the statements of income for NSTAR Electric for the nine months ended September 30, 2017 and 2016 included in this combined Quarterly Report on Form 10-Q:  
 For the Nine Months Ended September 30,
(Millions of Dollars)2017 2016 Increase/
(Decrease)
 Percent
Operating Revenues$1,913.5
 $1,986.0
 $(72.5) (3.7)%
Operating Expenses:     
  
Purchased Power and Transmission689.8
 764.9
 (75.1) (9.8)
Operations and Maintenance266.2
 279.9
 (13.7) (4.9)
Depreciation167.6
 159.2
 8.4
 5.3
Amortization of Regulatory Assets, Net17.8
 18.3
 (0.5) (2.7)
Energy Efficiency Programs198.8
 212.9
 (14.1) (6.6)
Taxes Other Than Income Taxes99.0
 101.8
 (2.8) (2.8)
Total Operating Expenses1,439.2
 1,537.0
 (97.8) (6.4)
Operating Income474.3
 449.0
 25.3
 5.6
Interest Expense70.0
 62.2
 7.8
 12.5
Other Income, Net8.7
 7.6
 1.1
 14.5
Income Before Income Tax Expense413.0
 394.4
 18.6
 4.7
Income Tax Expense161.3
 154.5
 6.8
 4.4
Net Income$251.7
 $239.9
 $11.8
 4.9 %

Operating Revenues
NSTAR Electric's retail sales volumes were as follows:
 For the Nine Months Ended September 30,
 2017 2016 Decrease Percent
Retail Sales Volumes in GWh15,204
 15,746
 (542) (3.4)%

NSTAR Electric's Operating Revenues, which consist of base distribution revenues and tracked revenues further described below, decreased by $72.5 million for the nine months ended September 30, 2017, as compared to the same period in 2016.  

Base distribution revenues:  Base distribution revenues, excluding LBR, decreased $11.2 million for the nine months ended September 30, 2017, as compared to the same period in 2016, as a result of lower sales volumes in 2017, as compared to 2016 driven by the mild summer weather during the third quarter of 2017. LBR increased $10.6 million for the nine months ended September 30, 2017, as compared to the same period in 2016. 

Tracked revenues:  Tracked revenues consist of certain costs that are recovered from customers in rates through DPU-approved cost tracking mechanisms and therefore, have no impact on earnings.  Costs recovered through cost tracking mechanisms include energy supply procurement and other energy-related costs, retail transmission charges, energy efficiency program costs, net metering for distributed generation and transition cost recovery revenues.   In addition, certain tracked revenues include incentives earned and carrying charges that are billed in rates to customers. Tracked distribution revenues decreased primarily as a result of a decrease in energy supply costs ($44.1 million) driven by decreased average retail prices and lower sales volumes, a decrease in retail transmission charges ($53.9 million), a decrease in the pension rate adjustment mechanism ($14.7 million), and a decrease in transition cost recovery revenues ($11.9 million).  Partially offsetting these decreases were an increase in net metering revenues ($20.2 million) and an increase in revenues related to renewable energy requirements ($23.4 million).

Transmission revenues increased by $20.6 million due primarily to the recovery of higher revenue requirements associated with ongoing investments in our transmission infrastructure.

Purchased Power and Transmission expense includes costs associated with purchasing electricity on behalf of NSTAR Electric's customers. These energy supply costs are recovered from customers in rates through DPU-approved cost tracking mechanisms, which have no impact on earnings (tracked costs).  Total Purchased Power and Transmission expense decreased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to the following:  
(Millions of Dollars)Decrease
Purchased Power Costs$(42.3)
Transmission Costs(32.8)
Total Purchased Power and Transmission$(75.1)



Included in purchased power costs are the costs associated with NSTAR Electric's basic service charge and deferred energy supply costs.  The basic service charge recovers energy-related costs incurred as a result of providing electric generation service supply to all customers who have not migrated to third party suppliers.  The decrease in purchased power costs was due primarily to lower prices associated with the procurement of energy supply and lower sales volumes.  The decrease in transmission costs was primarily the result of a decrease in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers.

Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs).  Operations and Maintenance expense decreased for the nine months ended September 30, 2017, as compared to the same period in 2016, driven by a $13.0 million decrease in non-tracked costs, which was primarily attributable to lower employee-related expenses, lower bad debt expense and lower storm restoration costs, partially offset by higher shared corporate costs, a $4.9 million charge recorded in the second quarter of 2017 related to the Boston Harbor civil action settlement, and higher vegetation management costs. Tracked costs decreased $0.7 million, which was primarily attributable to lower tracked employee-related expenses, partially offset by higher transmission expenses and higher tracked bad debt expense.

Depreciation expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to higher utility plant in service balances.  

Energy Efficiency Programs expense decreased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to the deferral adjustment, which reflects the actual cost of energy efficiency programs compared to the estimated amounts billed to customers and the timing of the recovery of energy efficiency costs. The deferral adjusts costs incurred to match energy efficiency revenue billed to customers. The costs for various state policy initiatives are recovered from customers in rates and have no impact on earnings.

Taxes Other Than Income Taxes expense decreased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to a decrease in property tax rates and lower employment-related taxes.

Interest Expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to new debt issuances.

Income Tax Expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to higher pre-tax earnings ($6.9 million), partially offset by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($0.1 million).

EARNINGS SUMMARY

NSTAR Electric's earnings increased $11.8 million for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to lower operations and maintenance expense, and lower property taxhigher depreciation expense, partially offset by lower sales volumes driven by the mild summer weather during the third quarter of 2017, and higher interestproperty and depreciationother tax expense.

LIQUIDITY

NSTAR Electric had cash flows provided by operating activities of $413.0 million for the nine months ended September 30, 2017, as compared to $564.3 million in the same period of 2016.  The decrease in operating cash flows was due primarily to a decrease in regulatory recoveries, which were significantly impacted by the timing of collections of purchased power and transmission costs, an increase of $56.3 million in Pension and PBOP Plan cash contributions, and the income tax payments of $23.9 million made in 2017, compared to the income tax refunds of $28.1 million received in 2016. Partially offsetting these decreases was a favorable impact related to the timing of collections of accounts receivable.

NSTAR Electric has a $450 million commercial paper program allowing NSTAR Electric to issue commercial paper as a form of short-term debt. As of September 30, 2017, NSTAR Electric had no short-term borrowings outstanding and as of December 31, 2016, NSTAR Electric had $126.5 million in short-term borrowings outstanding under its commercial paper program, leaving $450.0 million and $323.5 million of available borrowing capacity as of September 30, 2017 and December 31, 2016, respectively.  The weighted-average interest rate on these borrowings as of December 31, 2016 was 0.71 percent.  NSTAR Electric is a party to a five-year $450 million revolving credit facility. The revolving credit facility terminates on September 4, 2021.  The revolving credit facility serves to backstop NSTAR Electric's $450 million commercial paper program.  There were no borrowings outstanding on the revolving credit facility as of September 30, 2017 and December 31, 2016.







RESULTS OF OPERATIONS – PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY
The following provides the amounts and variances in operating revenues and expense line items in the statements of income for PSNH for the nine months ended September 30, 2017 and 2016 included in this combined Quarterly Report on Form 10-Q:  
 For the Nine Months Ended September 30,
(Millions of Dollars)2017 2016 Increase/
(Decrease)
 Percent
Operating Revenues$733.6
 $727.8
 $5.8
 0.8 %
Operating Expenses: 
  
  
  
Purchased Power, Fuel and Transmission179.3
 155.7
 23.6
 15.2
Operations and Maintenance191.2
 187.2
 4.0
 2.1
Depreciation95.3
 86.5
 8.8
 10.2
Amortization of Regulatory (Liabilities)/Assets, Net(10.7) 14.5
 (25.2) (a)
Energy Efficiency Programs11.0
 10.9
 0.1
 0.9
Taxes Other Than Income Taxes67.0
 64.5
 2.5
 3.9
Total Operating Expenses533.1
 519.3
 13.8
 2.7
Operating Income200.5
 208.5
 (8.0) (3.8)
Interest Expense38.7
 37.4
 1.3
 3.5
Other Income, Net2.9
 1.0
 1.9
 (a)
Income Before Income Tax Expense164.7
 172.1
 (7.4) (4.3)
Income Tax Expense65.1
 66.3
 (1.2) (1.8)
Net Income$99.6
 $105.8
 $(6.2) (5.9)%

(a) Percent greater than 100 not shown as it is not meaningful.

Operating Revenues
PSNH's retail sales volumes were as follows:
 For the Nine Months Ended September 30,
 2017 2016 Decrease Percent
Retail Sales Volumes in GWh5,835
 5,985
 (150) (2.5)%

PSNH's Operating Revenues, which consist of base distribution revenues and tracked revenues further described below, increased by $5.8 million for the nine months ended September 30, 2017, as compared to the same period in 2016.

Base distribution revenues:  Base distribution revenues decreased $2.0 million for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to a 2.5 percent decrease in sales volumes driven by the mild summer weather during the third quarter of 2017.

Tracked revenues: Tracked revenues consist of certain costs that are recovered from customers in rates through NHPUC-approved cost tracking mechanisms and therefore, have no impact on earnings.  Costs recovered through cost tracking mechanisms include energy supply procurement and energy-related costs, costs associated with the generation of electricity for customers, retail transmission charges, energy efficiency program costs and stranded cost recovery revenues.   In addition, certain tracked revenues include incentives earned and carrying charges that are billed in rates to customers. Tracked distribution revenues decreased primarily as a result of a decrease in revenues related to the timing of the sale of RECs ($15.3 million) and a decrease in the energy service rate ($5.1 million). Partially offsetting these decreases was an increase in retail transmission charges ($7.2 million) and an increase in wholesale generation revenues ($4.0 million).

Transmission revenues increased by $17.6 million due primarily to the recovery of higher revenue requirements associated with ongoing investments in our transmission infrastructure.

Purchased Power, Fuel and Transmission expense includes costs associated with PSNH's generation of electricity, as well as purchasing electricity on behalf of its customers.  These generation and energy supply costs are recovered from customers in rates through NHPUC-approved cost tracking mechanisms, which have no impact on earnings (tracked costs).  Total Purchased Power, Fuel and Transmission expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to the following:
(Millions of Dollars)Increase
Purchased Power and Generation Fuel Costs$5.1
Transmission Costs18.5
Total Purchased Power, Fuel and Transmission$23.6



In order to meet the demand of customers who have not migrated to third party suppliers, PSNH procures power through power supply contracts and spot purchases in the competitive New England wholesale power market and/or produces power through its own generation.  The increase in purchased power and generation fuel costs was due primarily to higher purchased power energy expenses that are recovered as a component of the Energy Service rate, and Regional Greenhouse Gas Initiative related expenses recovered in the SCRC. The increase in transmission costs was primarily the result of an increase in costs billed by ISO-NE that support regional grid investment, and Local Network Service charges, which reflect the cost of transmission service, as well as the retail transmission cost deferral, which reflects actual costs of transmission service compared to estimated amounts billed to customers.

Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs).  Operations and Maintenance expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, driven by a $2.1 million increase in tracked costs, which was primarily attributable to higher transmission expenses, partially offset by lower employee-related expenses. Non-tracked costs increased by $1.9 million, which was primarily attributable to higher shared corporate costs and higher vegetation management costs, partially offset by lower employee-related expenses.

Depreciation expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to higher utility plant in service balances.  

Amortization of Regulatory (Liabilities)/Assets, Net expense includes the deferral of energy supply and energy-related costs and the amortization of certain costs, which are recovered from customers in rates and have no impact on earnings.  The deferral adjusts expense to match the corresponding revenues.  The decrease for the nine months ended September 30, 2017, as compared to the same period in 2016, was due primarily to the fluctuation of the deferral, which can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs. 

Taxes Other Than Income Taxes expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to an increase in property taxes due to higher plant balances.

Income Tax Expense decreased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to lower pre-tax earnings ($2.6 million) and items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($1.0 million), partially offset by the absence of a tax credit in 2017 ($2.4 million).

EARNINGS SUMMARY

PSNH's earnings decreased $6.2 million for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to lower generation earnings, higher property tax and depreciation expense and lower sales volumes driven by the mild summer weather during the third quarter of 2017. These unfavorable earnings impacts were partially offset by an increase in transmission earnings driven by a higher transmission rate base.

LIQUIDITY

PSNH had cash flows provided by operating activities of $264.0 million for the nine months ended September 30, 2017, as compared to $306.0 million in the same period of 2016.  The decrease in operating cash flows was due primarily to the income tax payments of $11.8 million made in 2017, compared to the income tax refunds of $41.3 million received in 2016. Partially offsetting this decrease was $16.2 million of lower Pension Plan contributions made in 2017, as compared to 2016, and the favorable impacts related to the timing of regulatory recoveries.





RESULTS OF OPERATIONS – WESTERN MASSACHUSETTS ELECTRIC COMPANY

The following provides the amounts and variances in operating revenues and expense line items in the statements of income for WMECO for the nine months ended September 30, 2017 and 2016 included in this combined Quarterly Report on Form 10-Q:  
 For the Nine Months Ended September 30,
(Millions of Dollars)2017 2016 
Increase/
(Decrease)
 Percent
Operating Revenues$377.2
 $368.5
 $8.7
 2.4 %
Operating Expenses: 
  
  
  
Purchased Power and Transmission109.6
 104.4
 5.2
 5.0
Operations and Maintenance65.8
 68.0
 (2.2) (3.2)
Depreciation36.8
 34.4
 2.4
 7.0
Amortization of Regulatory Assets/(Liabilities), Net(0.6) 3.3
 (3.9) (a)
Energy Efficiency Programs29.7
 33.6
 (3.9) (11.6)
Taxes Other Than Income Taxes31.4
 30.4
 1.0
 3.3
Total Operating Expenses272.7
 274.1
 (1.4) (0.5)
Operating Income104.5
 94.4
 10.1
 10.7
Interest Expense18.8
 18.3
 0.5
 2.7
Other Income, Net1.4
 0.1
 1.3
 (a)
Income Before Income Tax Expense87.1
 76.2
 10.9
 14.3
Income Tax Expense34.7
 30.1
 4.6
 15.3
Net Income$52.4
 $46.1
 $6.3
 13.7 %

(a) Percent greater than 100 not shown as it is not meaningful.    

Operating Revenues
WMECO's retail sales volumes were as follows:
 For the Nine Months Ended September 30,
 2017 2016 Decrease Percent
Retail Sales Volumes in GWh2,579
 2,695
 (116) (4.3)%

WMECO's Operating Revenues, which consist of base distribution revenues and tracked revenues further described below, increased by $8.7 million for the nine months ended September 30, 2017, as compared to the same period in 2016.

Fluctuations in WMECO's sales volumes do not impact the level of base distribution revenue realized or earnings due to the DPU-approved revenue decoupling mechanism.  WMECO's revenue decoupling mechanism permits recovery of a base amount of distribution revenues ($132.4 million annually) and breaks the relationship between sales volumes and revenues recognized.  The revenue decoupling mechanism results in the recovery of approved base distribution revenue requirements.  

Fluctuations in the overall level of operating revenues are primarily related to tracked revenues.  Tracked revenues consist of certain costs that are recovered from customers in rates through DPU-approved cost tracking mechanisms and therefore, have no impact on earnings.  Costs recovered through cost tracking mechanisms include energy supply procurement and other energy-related costs, retail transmission charges, energy efficiency program costs, low income assistance programs, and restructuring and stranded cost recovery revenues.  In addition, certain tracked revenues include incentives earned and carrying charges that are billed in rates to customers. Tracked distribution revenues decreased due primarily to a decrease in energy supply costs ($10.8 million) driven by decreased average retail prices and lower sales volumes, partially offset by increases in revenues related to renewable energy requirements ($6.6 million).

Transmission revenues increased by $12.0 million due primarily to the recovery of higher revenue requirements associated with ongoing investments in our transmission infrastructure.

Purchased Power and Transmission expense includes costs associated with purchasing electricity on behalf of WMECO's customers. These energy supply costs are recovered from customers in rates through DPU-approved cost tracking mechanisms, which have no impact on earnings (tracked costs).  Total Purchased Power and Transmission expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to the following:
(Millions of Dollars)Increase/(Decrease)
Purchased Power Costs$(2.6)
Transmission Costs7.8
Total Purchased Power and Transmission$5.2



Included in purchased power costs are the costs associated with WMECO's basic service charge and deferred energy supply costs.  The basic service charge recovers energy-related costs incurred as a result of providing electric generation service supply to all customers who have not migrated to third party suppliers.  The decrease in purchased power costs for the nine months ended September 30, 2017, as compared to the same period in 2016, was due primarily to lower prices associated with the procurement of energy supply and lower sales volumes. The increase in transmission costs for the nine months ended September 30, 2017, as compared to the same period in 2016, was primarily the result of an increase in costs billed by ISO-NE that support regional grid investment, and Local Network Service charges, which reflect the cost of transmission service, as well as the retail transmission cost deferral, which reflects actual costs of transmission service compared to estimated amounts billed to customers.

Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs).  Operations and Maintenance expense decreased for the nine months ended September 30, 2017, as compared to the same period in 2016, driven by a decrease in non-tracked costs of $1.9 million, which was primarily attributable to lower employee-related expenses, partially offset by higher shared corporate costs. Tracked costs also decreased by $0.3 million, which was primarily attributable to lower tracked employee-related expenses, and a lower deferral adjustment for RECs generated and sold by the WMECO solar program, partially offset by higher transmission expenses.

Depreciation expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to higher utility plant in service balances.  

Amortization of Regulatory Assets/(Liabilities), Net expense decreased for the nine months ended September 30, 2017, as compared to the same period in 2016, due to the timing of refunds or recovery of tracked costs to/from customers in rates.  These costs have no impact on earnings.

Energy Efficiency Programs expense decreased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to the deferral adjustment, which reflects the actual cost of energy efficiency programs compared to the estimated amounts billed to customers and the timing of the recovery of energy efficiency costs. The deferral adjusts costs incurred to match energy efficiency revenue billed to customers. The costs for various state policy initiatives are recovered from customers in rates and have no impact on earnings.

Income Tax Expense increased for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to higher pre-tax earnings ($3.8 million) and items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($0.8 million).

EARNINGS SUMMARY

WMECO's earnings increased $6.3 million for the nine months ended September 30, 2017, as compared to the same period in 2016, due primarily to an increase in transmission earnings driven by a higher transmission rate base, and lower operations and maintenance expense.

LIQUIDITY

WMECO had cash flows provided by operating activities of $92.0 million for the nine months ended September 30, 2017, as compared to $124.8 million in the same period of 2016.  The decrease in operating cash flows was due primarily to the income tax payments of $2.0 million made in 2017, compared to the income tax refunds of $21.6 million received in 2016, and the unfavorable impacts related to the timing of collections and payments of our working capital items, including accounts receivable. Partially offsetting these unfavorable impacts was the benefit related to the timing of regulatory recoveries.



ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Information

Commodity Price Risk Management:  Our Regulated companies enter into energy contracts to serve our customers and the economic impacts of those contracts are passed on to our customers.  Accordingly, the Regulated companies have no exposure to loss of future earnings or fair values due to these market risk-sensitive instruments.  Eversource's Energy Supply Risk Committee, comprised of senior officers, reviews and approves all large scale energy related transactions entered into by its Regulated companies.

Other Risk Management Activities

Interest Rate Risk Management:  We manage our interest rate risk exposure in accordance with our written policies and procedures by maintaining a mix of fixed and variable rate long-term debt.  

Credit Risk Management:  Credit risk relates to the risk of loss that we would incur as a result of non-performance by counterparties pursuant to the terms of our contractual obligations.  We serve a wide variety of customers and transact with suppliers that include IPPs, industrial companies, natural gas and electric utilities, oil and gas producers, financial institutions, and other energy marketers.  Margin accounts exist within this diverse group, and we realize interest receipts and payments related to balances outstanding in these margin accounts.  This wide customer and supplier mix generates a need for a variety of contractual structures, products and terms that, in turn, require us to manage the portfolio of market risk inherent in those transactions in a manner consistent with the parameters established by our risk management process.

Our Regulated companies are subject to credit risk from certain long-term or high-volume supply contracts with energy marketing companies.  Our Regulated companies manage the credit risk with these counterparties in accordance with established credit risk practices and monitor contracting risks, including credit risk.  As of September 30, 2017,2018, our Regulated companies did not holdheld collateral (letters of credit)credit or cash) of $5 million from counterparties related to our standard service contracts.  As of September 30, 2017,2018, Eversource had $24.5$24.6 million of cash posted with ISO-NE related to energy transactions.

We have provided additional disclosures regarding interest rate risk management and credit risk management in Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," in Eversource's 20162017 Form 10-K, which is incorporated herein by reference. There have been no additional risks identified and no material changes with regard to the items previously disclosed in the Eversource 20162017 Form 10-K.

ITEM 4.CONTROLS AND PROCEDURES

Management, on behalf of Eversource, CL&P, NSTAR Electric PSNH and WMECO,PSNH, evaluated the design and operation of the disclosure controls and procedures as of September 30, 20172018 to determine whether they are effective in ensuring that the disclosure of required information is made timely and in accordance with the Securities Exchange Act of 1934 and the rules and regulations of the SEC.  This evaluation was made under management's supervision and with management's participation, including the principal executive officer and principal financial officer as of the end of the period covered by this Quarterly Report on Form 10-Q.  There are inherent limitations of disclosure controls and procedures, including the possibility of human error and the circumventing or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.  The principal executive officer and principal financial officer have concluded, based on their review, that the disclosure controls and procedures of Eversource, CL&P, NSTAR Electric PSNH and WMECOPSNH are effective to ensure that information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and regulations and (ii) is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

During the third quarter of 2017, Eversource implemented a new supply chain management system resulting in a material change in internal controls over financial reporting. This new supply chain system consisted of both modern software tools and revised processes that consolidated and standardized all supply chain processes and practices across all of Eversource, including CL&P, NSTAR Electric, PSNH, and WMECO. Pre-implementation testing and post-implementation reviews were conducted by management to ensure that internal controls surrounding the system implementation process, the applications, and the closing process were properly designed to prevent material financial statement errors. Such procedures included the review of required documents, user acceptance testing, change management procedures, access controls, data migration strategies and reconciliations, application interface testing and other standard application controls.

Except as described above, thereThere have been no changes in internal controls over financial reporting for Eversource, CL&P, NSTAR Electric PSNH and WMECOPSNH during the quarter ended September 30, 20172018 that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.




PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

We are parties to various legal proceedings.  We have disclosed these legal proceedings in Part I, Item 3, "Legal Proceedings," and elsewhere in our 20162017 Form 10-K.  These disclosures are incorporated herein by reference.  

On May 22, 2017,As previously disclosed, each of the Yankee Companies filed subsequent lawsuits against the DOE in the Court of Federal Claims on May 22, 2017 seeking monetary damages totaling approximately $100 million for CYAPC, YAEC and MYAPC, covering the years from 2013 to 2016 (“DOE Phase IV”). The DOE Phase IV trial is now expected to begin in 2018.early 2019. For a further discussion of the Yankee Companies v. U.S. Department of Energy, see Part I, Item 3, “Legal Proceedings” of our 20162017 Form 10-K.

Other than as set forth above, there have been no additional material legal proceedings identified and no further material changes with regard to the legal proceedings previously disclosed in our 20162017 Form 10-K.

ITEM 1A.RISK FACTORS

We are subject to a variety of significant risks in addition to the matters set forth under "Forward-Looking Statements,"our forward-looking statements section in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Quarterly Report on Form 10-Q.  We have identified a number of these risk factors in Part I, Item 1A, "Risk Factors," in our 20162017 Form 10-K, which risk factors are incorporated herein by reference.  These risk factors should be considered carefully in evaluating our risk profile.  There have been no additional risk factors identified and no material changes with regard to the risk factors previously disclosed in our 20162017 Form 10-K.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table discloses purchases of our common shares made by us or on our behalf for the periods shown below.  The common shares purchased consist of open market purchases made by the Company or an independent agent.  These share transactions related to shares awarded under the Company's Incentive Plan and Dividend Reinvestment Plan and matching contributions under the Eversource 401k Plan.
Period
Total Number of
Shares Purchased
Average Price
Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans and Programs (at month end)
July 1 - July 31, 201799,090
$60.76


August 1 - August 31, 20174,802
62.08


September 1 - September 30, 201774,148
60.77


Total178,040
$60.80


Period
Total Number of
Shares Purchased
Average Price
Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans and Programs (at month end)
July 1 - July 31, 20182,751
$59.43


August 1 - August 31, 20183,546
61.75


September 1 - September 30, 20186,069
61.85


Total12,366
$61.28





ITEM 6.EXHIBITS

Each document described below is filed herewith, unless designated with an asterisk (*), which exhibits are incorporated by reference by the registrant under whose name the exhibit appears.
 Exhibit No. Description
    
 Listing of Exhibits (Eversource)
    
 12 
    
 31Ratio of Earnings to Fixed Charges
 Certification by the Chief Executive Officer of Eversource Energy pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    
  
    
  
    
 Listing of Exhibits (CL&P)
    
*12 
Supplemental Indenture (2017 Series A Bonds) between CL&P and Deutsche Bank Trust Company Americas, as Trustee dated asRatio of August 1, 2017 (incorporated by referenceEarnings to Exhibit 4.1, CL&P Current Report on Form 8-K filed August 23, 2017, File No. 000-00404)
    
 31Ratio of Earnings to Fixed Charges
 Certification by the Chairman of The Connecticut Light and Power Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    
  
    
  
    
 Listing of Exhibits (NSTAR Electric Company)
    
  
    
  
    
  
    
  
    
 Listing of Exhibits (PSNH)
    
  
    
  
    
  


    
  
    
 Listing of Exhibits (WMECO)
    
 Ratio of Earnings to Fixed Charges
   


Certification by the Chairman of Western Massachusetts Electric Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by the Chief Financial Officer of Western Massachusetts Electric Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by the Chairman and the Chief Financial Officer of Western Massachusetts Electric Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 Listing of Exhibits (Eversource, CL&P, NSTAR Electric, PSNH, WMECO)PSNH)
    
 101.INS XBRL Instance Document
    
 101.SCH XBRL Taxonomy Extension Schema
    
 101.CAL XBRL Taxonomy Extension Calculation
    
 101.DEF XBRL Taxonomy Extension Definition
    
 101.LAB XBRL Taxonomy Extension Labels
    
 101.PRE XBRL Taxonomy Extension Presentation



SIGNATURE


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





  EVERSOURCE ENERGY
    
November 3, 20176, 2018 By:/s/ Jay S. Buth
   Jay S. Buth
   Vice President, Controller and Chief Accounting Officer

     


SIGNATURE


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





  THE CONNECTICUT LIGHT AND POWER COMPANY
    
November 3, 20176, 2018 By:/s/ Jay S. Buth
   Jay S. Buth
   Vice President, Controller and Chief Accounting Officer

     

SIGNATURE


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





NSTAR ELECTRIC COMPANY
November 3, 2017By:/s/ Jay S. Buth
Jay S. Buth
Vice President, Controller and Chief Accounting Officer











SIGNATURE


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





  PUBLIC SERVICENSTAR ELECTRIC COMPANY OF NEW HAMPSHIRE
    
November 3, 20176, 2018 By:/s/ Jay S. Buth
   Jay S. Buth
   Vice President, Controller and Chief Accounting Officer

     


SIGNATURE


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





  WESTERN MASSACHUSETTS ELECTRICPUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
    
November 3, 20176, 2018 By:/s/ Jay S. Buth
   Jay S. Buth
   Vice President, Controller and Chief Accounting Officer




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