Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

EVERSOURCE ENERGY AND SUBSIDIARIES

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related combined notes included in this combined Annual Report on Form 10-K. References in this combined Annual Report on Form 10-K 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 consolidated financial statements of Eversource, NSTAR Electric and PSNH and the financial statements of CL&P are herein collectively referred to as the "financial statements." Our discussion of fiscal year 2019 compared to fiscal year 2018 is included herein. Unless expressly stated otherwise, for discussion and analysis of fiscal year 2017 items and fiscal year 2018 compared to fiscal year 2017, please refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our combined 2018 Annual Report on Form 10-K, which is incorporated herein by reference.

Refer to the Glossary of Terms included in this combined Annual Report on Form 10-K 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. Our earnings discussion also includes a non-GAAP financial measure referencing our 2019 earnings and EPS excluding the impairment charge for the NPT project.

We use these non-GAAP financial measures to evaluate and provide details of earnings results by business and to more fully compare and explain our 2019 results without including the impact of the NPT impairment charge. We believe the NPT impairment charge is not indicative of our ongoing performance. Due to the nature and significance of the impairment charge on Net Income Attributable to Common Shareholders, we believe that the non-GAAP presentation is a more meaningful representation of our financial performance and provides additional and useful information to readers of this report in analyzing historical and future performance of our business. These non-GAAP financial measures 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.

The results of Aquarion and its subsidiaries, hereinafter referred to as "Aquarion," are included from the date of the acquisition, December 4, 2017, through December 31, 2019 throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations.

Financial Condition and Business Analysis

Executive Summary

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

Earnings Overview and Future Outlook:

•	We earned $909.1 million, or $2.81 per share, in 2019, compared with $1.03 billion, or $3.25 per share, in 2018. Results for 2019 include an after-tax impairment charge of $204.4 million, or $0.64 per share, related to our investment in the NPT project. Excluding that impairment charge, we earned $1.11 billion, or $3.45 per share, in 2019.

•

Our electric distribution segment earned $513.3 million, or $1.59 per share, in 2019, compared with $455.4 million, or $1.44 per share, in 2018. Our electric transmission segment earned $256.5 million, or $0.79 per share, in 2019, compared with $427.2 million, or $1.34 per share, in 2018. Excluding the after-tax NPT impairment charge of $204.4 million, or $0.64 per share, our electric transmission segment earned $460.9 million, or $1.43 per share, in 2019. Our natural gas distribution segment earned $96.2 million, or $0.30 per share, in 2019, compared with $93.2 million, or $0.29 per share, in 2018. Our water distribution segment earned $34.9 million, or $0.11 per share, in 2019, compared with $30.9 million, or $0.10 per share in 2018.

•	Eversource parent and other companies earned $8.2 million, or $0.02 per share, in 2019, compared with $26.3 million, or $0.08 per share, in 2018.

•	We currently project 2020 earnings of between $3.60 per share and $3.70 per share.

Liquidity:

•	Cash flows provided by operating activities totaled $2.01 billion in 2019, compared with $1.83 billion in 2018. Investments in property, plant and equipment totaled $2.91 billion in 2019 and $2.57 billion in 2018. Cash totaled $15.4 million as of December 31, 2019, compared with $108.1 million as of December 31, 2018.

•	In 2019, we issued 11,980,000 common shares, which resulted in proceeds of $852.3 million, net of issuance costs.

•

In 2019, we issued $1.52 billion of new long-term debt, consisting of $500 million by CL&P, $400 million by NSTAR Electric, $300 million by PSNH, $200 million by Yankee Gas, $75 million by NSTAR Gas and $45 million by Aquarion. Proceeds from these new issuances were used primarily to repay short-term borrowings, repay long-term debt at maturity and fund capital expenditures and working capital. In 2019, we repaid, at maturity, $801.1 million of previously issued long-term debt, consisting of $350 million by Eversource parent, $250 million by CL&P, $150 million by PSNH, $50 million by Yankee Gas and $1.1 million by Aquarion.

•

In 2019, we paid cash dividends of $663.2 million and issued non-cash dividends of $22.8 million in the form of treasury shares, totaling dividends of $2.14 per common share, compared with cash dividends of $640.1 million, or $2.02 per common share, in 2018. On February 5, 2020, our Board of Trustees approved a common share dividend payment of $0.5675 per share, payable on March 31, 2020 to shareholders of record as of March 4, 2020. The 2020 dividend represents an increase of 6.1 percent over the dividend paid in December 2019.

•

We project to make capital expenditures of $14.19 billion from 2020 through 2024, of which we expect $8.63 billion to be in our electric and natural gas distribution segments, $3.98 billion to be in our electric transmission segment and $0.69 billion to be in our water distribution segment. We also project to invest $0.90 billion in information technology and facilities upgrades and enhancements. These projections do not include any expected investments related to offshore wind projects.

Strategic:

•

On February 26, 2020, Eversource and NiSource entered into an asset purchase agreement where Eversource would acquire the assets that comprise NiSource’s local gas distribution business in Massachusetts for a purchase price of $1.1 billion. The liabilities to be assumed by Eversource specifically exclude any liabilities (past or future) arising out of or related to the fires and explosions that occurred on September 13, 2018 in Lawrence, Andover and North Andover, Massachusetts. The acquisition and resulting rate plan both require DPU and other approvals. Eversource and NiSource expect to close this transaction later this year.

Earnings Overview

Consolidated: Below is a summary of our earnings by business, which also reconciles the non-GAAP financial measures of consolidated non-GAAP earnings and EPS, as well as EPS by business, to the most directly comparable GAAP measures of consolidated Net Income Attributable to Common Shareholders and diluted EPS.

	For the Years Ended December 31,
	2019								2018								2017
(Millions of Dollars, Except Per Share Amounts)	Amount				Per Share				Amount				Per Share				Amount				Per Share
Net Income Attributable to Common Shareholders (GAAP)	$	909.1			$	2.81			$	1,033.0			$	3.25			$	988.0			$	3.11
Regulated Companies	$	1,105.3			$	3.43			$	1,006.7			$	3.17			$	962.7			$	3.03
Eversource Parent and Other Companies	8.2				0.02				26.3				0.08				25.3				0.08
Non-GAAP Earnings	$	1,113.5			$	3.45			$	1,033.0			$	3.25			$	988.0			$	3.11
Impairment of Northern Pass Transmission (after-tax)	(204.4		)		(0.64		)		—				—				—				—
Net Income Attributable to Common Shareholders (GAAP)	$	909.1			$	2.81			$	1,033.0			$	3.25			$	988.0			$	3.11

Regulated Companies: Our regulated companies comprise the electric distribution, electric transmission, natural gas distribution and water distribution segments. A summary of our segment earnings and EPS is as follows:

	For the Years Ended December 31,
	2019								2018								2017
(Millions of Dollars, Except Per Share Amounts)	Amount				Per Share				Amount				Per Share				Amount				Per Share
Net Income - Regulated Companies (GAAP)	$	900.9			$	2.79			$	1,006.7			$	3.17			$	962.7			$	3.03
Electric Distribution	$	513.3			$	1.59			$	455.4			$	1.44			$	497.4			$	1.57
Electric Transmission, excluding Northern Pass Transmission impairment (Non-GAAP)	460.9				1.43				427.2				1.34				391.9				1.23
Natural Gas Distribution	96.2				0.30				93.2				0.29				74.6				0.23
Water Distribution	34.9				0.11				30.9				0.10				(1.2		)		—
Net Income - Regulated Companies (Non-GAAP)	$	1,105.3			$	3.43			$	1,006.7			$	3.17			$	962.7			$	3.03
Impairment of Northern Pass Transmission (after-tax)	(204.4		)		(0.64		)		—				—				—				—
Net Income - Regulated Companies (GAAP)	$	900.9			$	2.79			$	1,006.7			$	3.17			$	962.7			$	3.03

Our electric distribution segment earnings increased $57.9 million in 2019, as compared to 2018, due primarily to the CL&P, NSTAR Electric and PSNH base distribution rate increases, higher earnings from CL&P's capital tracker mechanism, effective July 1, 2018, due to increased electric system improvements, and higher earnings from NSTAR Electric's solar generation capital tracker mechanism. The earnings increase was partially offset by higher depreciation expense, lower non-service income from our benefit plans, higher operations and maintenance expense, the absence in 2019 of generation earnings at PSNH due to the sale of its generation assets in 2018, and the absence in 2019 of a gain on the sale of property at PSNH in 2018.

Our electric transmission segment earnings decreased $170.7 million in 2019, as compared to 2018, due primarily to the impairment of NPT, which resulted in an after-tax charge of $204.4 million, or $0.64 per share in 2019. Excluding the NPT impairment charge, earnings increased $33.7 million in 2019, as compared to 2018, due primarily to a higher transmission rate base as a result of our continued investment in our transmission infrastructure and the absence in 2019 of approximately $6 million (after-tax) in tax-related regulatory assets that we concluded were not recoverable from customers in 2018. The earnings increase was partially offset by a lower benefit from the annual billing and cost reconciliation filing with FERC and the absence of the NPT AFUDC equity income.

Our natural gas distribution segment earnings increased $3.0 million in 2019, as compared to 2018, due primarily to the impact of the Yankee Gas base distribution rate increase effective November 15, 2018 and higher earnings from capital tracker mechanisms due to continued investments in natural gas infrastructure. The earnings increase was partially offset by higher operations and maintenance expense, higher depreciation expense, higher property and other tax expense, and higher interest expense.

Our water distribution segment earnings increased $4.0 million in 2019, as compared to 2018, due primarily to a lower effective tax rate driven by the elimination of a tax-related regulatory liability.

Eversource Parent and Other Companies: Eversource parent and other companies earnings decreased $18.1 million in 2019, as compared to 2018, due primarily to a higher effective tax rate due in part to higher income tax reserves in 2019 and the absence in 2019 of income tax benefits recognized in 2018, higher interest expense, and the absence in 2019 of a 2018 benefit related to the allowed recovery of certain previously expensed merger-related costs in distribution rates. The earnings decrease was partially offset by the absence of the 2018 impairment of our investment in the Access Northeast project, and a higher return at Eversource Service as a result of increased investments in property, plant and equipment.

Liquidity

Cash totaled $15.4 million as of December 31, 2019, compared with $108.1 million as of December 31, 2018.

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. Eversource parent, CL&P, PSNH, NSTAR Gas, Yankee Gas and Aquarion Water Company of Connecticut are also parties to a five-year $1.45 billion revolving credit facility. Effective December 9, 2019, the revolving credit facility's termination date was extended for one additional year to December 6, 2024. The revolving credit facility 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. Effective December 9, 2019, the revolving credit facility's termination date was extended for one additional year to December 6, 2024. The revolving credit facility serves to backstop NSTAR Electric's $650 million commercial paper program.

The amount of borrowings outstanding and available under the commercial paper programs were as follows:

	Borrowings Outstanding as of December 31,								Available Borrowing Capacity as of December 31,								Weighted-Average Interest Rate as of December 31,
(Millions of Dollars)	2019				2018				2019				2018				2019			2018
Eversource Parent Commercial Paper Program	$	1,224.9			$	631.5			$	225.1			$	818.5			1.98	%		2.77	%
NSTAR Electric Commercial Paper Program	10.5				278.5				639.5				371.5				1.63	%		2.50	%

There were no borrowings outstanding on either the Eversource parent or NSTAR Electric revolving credit facilities as of December 31, 2019 or 2018.

Amounts outstanding under the commercial paper programs and revolving credit facilities are included in Notes Payable and classified in current liabilities on the Eversource and NSTAR Electric 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 issuance on January 10, 2020, the net proceeds of which were used to repay short-term borrowings outstanding under its commercial paper program, $346.3 million of commercial paper borrowings under the Eversource parent commercial paper program were classified as Long-Term Debt as of December 31, 2019.

Intercompany Borrowings: Eversource parent uses its available capital resources to provide loans to its subsidiaries to assist in meeting their short-term borrowing needs. Eversource parent records intercompany interest income from its loans to subsidiaries, which is eliminated in consolidation. Intercompany loans from Eversource parent to its subsidiaries are eliminated in consolidation on Eversource's balance sheets. As of December 31, 2019, there were intercompany loans from Eversource parent to CL&P of $63.8 million, to PSNH of $27.0 million, and to a subsidiary of NSTAR Electric of $30.3 million. As of December 31, 2018, there were intercompany loans from Eversource parent to PSNH of $57.0 million. Intercompany loans from Eversource parent are included in Notes Payable to Eversource Parent and classified in current liabilities on the respective subsidiary's balance sheets.

Long-Term Debt: The following table summarizes long-term debt issuances and repayments:

(Millions of Dollars)	Issue Date		Issuance/(Repayment)				Maturity Date		Use of Proceeds for Issuance/ Repayment Information
CL&P:
4.00% 2018 Series A First Mortgage Bonds (1)	April 2019		$	300.0			April 2048		Paid short-term borrowings that were used to pay long-term debt that matured on February 1, 2019 and fund capital expenditures and working capital
3.20% 2017 Series A First Mortgage Bonds (2)	September 2019		200.0				March 2027		Paid short-term borrowings and fund capital expenditures and working capital
5.50% 2009 Series A First Mortgage Bonds	February 2009		(250.0		)		February 2019		Paid at maturity on February 1, 2019
NSTAR Electric:
3.25% 2019 Debentures	May 2019		400.0				May 2029		Paid short-term borrowings that were used to fund investments in eligible green expenditures
PSNH:
3.60% 2019 Series T First Mortgage Bonds	June 2019		300.0				July 2049		Paid long-term debt that matured in December 2019, paid short-term borrowings and fund capital expenditures and working capital
4.50% 2009 Series P First Mortgage Bonds	December 2009		(150.0		)		December 2019		Paid at maturity on December 1, 2019
Other:
Eversource Parent 4.50% Debentures	November 2009		(350.0		)		November 2019		Paid at maturity on November 15, 2019
Eversource Parent 3.45% Series P Senior Notes	January 2020		350.0				January 2050		Paid short-term borrowings
NSTAR Gas 3.74% Series Q First Mortgage Bonds	July 2019		75.0				August 2049		Paid short-term borrowings and fund capital expenditures and working capital
Yankee Gas 2.23% Series P First Mortgage Bonds	September 2019		100.0				October 2024		Paid short-term borrowings and for general corporate purposes
Yankee Gas 3.30% Series Q First Mortgage Bonds	September 2019		100.0				October 2049		Paid short-term borrowings and for general corporate purposes
Yankee Gas 5.26% Series H First Mortgage Bonds	November 2004		(50.0		)		November 2019		Paid at maturity on November 1, 2019
Aquarion 3.54% Senior Notes	December 2019		45.0				December 2049		Paid short-term borrowings

(1) These bonds are part of the same series issued by CL&P in March 2018. The aggregate outstanding principal amount of these bonds is now $800 million.

(2) These bonds are part of the same series issued by CL&P in March 2017. The aggregate outstanding principal amount of these bonds is now $500 million.

Long-Term Debt Issuance Authorizations: On February 27, 2019, the DPU approved NSTAR Electric's request for authorization to issue up to $800 million in long-term debt through December 31, 2020. On April 26, 2019, the NHPUC approved PSNH's request for authorization to issue up to $300 million in long-term debt through December 31, 2019. On August 14, 2019, PURA approved CL&P's request for authorization to issue up to $675 million in long-term debt through December 31, 2022. On December 11, 2019, PURA approved Aquarion Water Company of Connecticut's request for authorization to issue up to $45 million of long-term debt. On January 27, 2020, the DPU approved NSTAR Gas' request for authorization to issue up to $270 million in long-term debt through December 31, 2021.

Rate Reduction Bonds: PSNH's RRB payments consist of principal and interest and are paid semi-annually, beginning on February 1, 2019. PSNH paid $52.3 million of RRB principal payments and $26.8 million of interest payments in 2019.

Common Share Issuance and Forward Sale Agreement: On June 4, 2019, Eversource completed an equity offering of 17,940,000 common shares, consisting of 5,980,000 common shares issued directly by the Company and 11,960,000 common shares issuable pursuant to a forward sale agreement with an investment bank. The issuance of 5,980,000 common shares resulted in proceeds of $426.9 million, net of issuance costs.

Under the forward sale agreement, a total of 11,960,000 common shares were borrowed from third parties and sold by the underwriters. The forward sale agreement allows Eversource, at its election and prior to May 29, 2020, to physically settle the forward sale agreement by issuing common shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially, $71.48 per share) or, alternatively, to settle the forward sale agreement in whole or in part through the delivery or receipt of shares or cash. The forward sale price is subject to adjustment daily based on a floating interest rate factor and will decrease in respect of certain fixed amounts specified in the agreement, such as dividends.

On December 30, 2019, Eversource physically settled a portion of the forward sale agreement by delivering 6,000,000 common shares in exchange for net proceeds of $425.4 million. The forward sale price used to determine the cash proceeds received by Eversource was calculated based on the initial forward sale price of $71.48 per share, as adjusted in accordance with the forward sale agreement.

The 2019 issuances of 11,980,000 common shares resulted in proceeds of $852.3 million, net of issuance costs, and were reflected in shareholders’ equity and as financing activities on the statement of cash flows.

Eversource’s intent is to physically settle the forward sale agreement by issuing common shares. As of December 31, 2019, if Eversource had elected to net settle the forward sale agreement, Eversource would have been required to pay $84.4 million under a cash settlement or would have been required to deliver 992,189 common shares under a net share settlement.

Issuances of shares under the forward sale agreement are classified as equity transactions. Accordingly, no amounts relating to the forward sale agreement have or will be recorded in the financial statements until settlements take place. Prior to any settlements, the only impact to the financial statements is the inclusion of incremental shares within the calculation of diluted EPS using the treasury stock method. See Note 22, "Earnings Per Share," to the financial statements for information on the forward sale agreement’s impact on the calculation of diluted EPS.

Eversource used the net proceeds received upon the direct issuance of common shares and the net proceeds received upon partial settlement of the forward sale agreement to repay short-term debt under the commercial paper program, to fund capital spending and clean energy initiatives, and for general corporate purposes.

Cash Flows: Cash flows provided by operating activities totaled $2.01 billion in 2019, compared with $1.83 billion in 2018. The increase in operating cash flows was due primarily to a decrease in 2019 of approximately $148 million of major storm restoration cost payments, $116 million in lower payments made in 2019 to the DOE by CYAPC to partially settle its pre-1983 spent nuclear fuel obligation, and a $73.2 million decrease in pension and PBOP cash contributions made in 2019, as compared to 2018. Also contributing to the increase were $102.8 million of lower income tax payments made in 2019, as compared to 2018, $68.8 million in DOE Phase IV litigation proceeds received by CYAPC and YAEC in 2019, and the timing of cash collections on our accounts receivables. Partially offsetting these favorable impacts were the timing of collections for regulatory tracking mechanisms, which were significantly impacted by the timing of collections of purchased power and transmission costs at NSTAR Electric, and the timing of accounts payable cash payments and other working capital items.

Cash flows provided by operating activities totaled $1.83 billion in 2018, compared with $2.00 billion in 2017. The decrease in operating cash flows was due primarily to cash payments made in 2018 for storm restoration costs of approximately $252 million, an increase of $128 million in income tax payments made in 2018, as compared to 2017, and the unfavorable impacts related to the timing of payments of our working capital items, including accounts receivable and accounts payable. In addition, in December 2018, CYAPC paid $145 million to the DOE to partially settle its pre-1983 spent nuclear fuel obligation. Partially offsetting these unfavorable impacts were the timing of cash collected for regulatory tracking mechanisms and a decrease of $47.9 million in 2018 of pension and PBOP contributions.

In 2019, we paid cash dividends of $663.2 million and issued non-cash dividends of $22.8 million in the form of treasury shares, totaling dividends of $2.14 per common share, compared with cash dividends of $640.1 million, or $2.02 per common share, in 2018. Our quarterly common share dividend payment was $0.535 per share in 2019, as compared to $0.505 per share in 2018. On February 5, 2020, our Board of Trustees approved a common share dividend payment of $0.5675 per share, payable on March 31, 2020 to shareholders of record as of March 4, 2020. The 2020 dividend represents an increase of 6.1 percent over the dividend paid in December 2019.

Beginning in 2019, Eversource began issuing treasury shares to satisfy awards under the Company's incentive plans, shares issued under the dividend reinvestment and share purchase plan, and matching contributions under the Eversource 401k Plan.

In 2019, CL&P, NSTAR Electric and PSNH paid $341.8 million, $181.8 million and $271.0 million, respectively, in common stock dividends 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 2019, investments for Eversource, CL&P, NSTAR Electric and PSNH were $2.91 billion, $917.5 million, $861.4 million and $309.0 million, respectively.

Eversource, CL&P, NSTAR Electric and PSNH each uses its available capital resources to fund its respective construction expenditures, meet debt requirements, pay operating costs, including storm-related costs, pay dividends, and fund other corporate obligations, such as pension contributions. Eversource's regulated companies recover their electric, natural gas and water distribution construction expenditures as the related project costs are depreciated over the life of the assets. This impacts the timing of the revenue stream designed to fully recover the total investment plus a return on the equity and debt used to finance the investments. The current growth in Eversource's construction expenditures utilizes a significant amount of cash for projects that have a long-term return on investment and recovery period, totaling approximately $2.91 billion in cash capital spend in 2019. In addition, Eversource's investments in its offshore wind business totaled $415.0 million in 2019, which are

recognized as long-term assets. These factors have resulted in current liabilities exceeding current assets by $1.19 billion, $91.7 million, $280.5 million, and $36.7 million at Eversource, CL&P, NSTAR Electric and PSNH, respectively, as of December 31, 2019.

As of December 31, 2019, $296.1 million of Eversource's long-term debt, including $95.0 million, $50.0 million, $150.0 million, and $1.1 million for NSTAR Electric, Yankee Gas, NSTAR Gas and Aquarion, respectively, will mature within the next 12 months. Included in the current portion of long-term debt on the Eversource balance sheet is $31.3 million related to fair value adjustments from our various business combinations that will be amortized within the next 12 months and have no cash flow impact. Eversource, with its strong credit ratings, has several options available in the financial markets to repay or refinance these maturities with the issuance of new long-term debt. Eversource, CL&P, NSTAR Electric and PSNH will reduce their short-term borrowings with operating cash flows or with the issuance of new long-term debt, determined by considering capital requirements and maintenance of Eversource's credit rating and profile.

We expect the future operating cash flows of Eversource, CL&P, NSTAR Electric and PSNH, along with our existing borrowing availability and access to both debt and equity markets, will be sufficient to meet any working capital and future operating requirements, and capital investment forecasted opportunities.

Credit Ratings: A summary of our corporate credit ratings and outlooks by Moody's, S&P and Fitch is as follows:

	Moody's				S&P				Fitch
	Current		Outlook		Current		Outlook		Current		Outlook
Eversource Parent	Baa1		Stable		A-		Stable		BBB+		Stable
CL&P	A3		Stable		A		Stable		A-		Stable
NSTAR Electric	A1		Stable		A		Stable		A		Stable
PSNH	A3		Stable		A		Stable		A-		Stable

A summary of the current credit ratings and outlooks by Moody's, S&P and Fitch for senior unsecured debt of Eversource parent and NSTAR Electric, and senior secured debt of CL&P and PSNH is as follows:

	Moody's				S&P				Fitch
	Current		Outlook		Current		Outlook		Current		Outlook
Eversource Parent	Baa1		Stable		BBB+		Stable		BBB+		Stable
CL&P	A1		Stable		A+		Stable		A+		Stable
NSTAR Electric	A1		Stable		A		Stable		A+		Stable
PSNH	A1		Stable		A+		Stable		A+		Stable

Business Development and 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 $3.06 billion in 2019, $2.86 billion in 2018, and $2.52 billion in 2017. These amounts included $239.0 million in 2019, $184.6 million in 2018, and $165.9 million in 2017 related to information technology and facilities upgrades and enhancements, primarily at Eversource Service and The Rocky River Realty Company.

Electric Transmission Business: Our consolidated electric transmission business capital expenditures increased by $16.0 million in 2019, as compared to 2018. A summary of electric transmission capital expenditures by company is as follows:

	For the Years Ended December 31,
(Millions of Dollars)	2019				2018				2017
CL&P	$	459.5			$	465.5			$	431.5
NSTAR Electric	379.7				334.3				301.9
PSNH	190.4				194.2				155.6
NPT	9.8				29.4				43.3
Total Electric Transmission Segment	$	1,039.4			$	1,023.4			$	932.3

Eastern Massachusetts Transmission Projects: These projects consist of a portfolio of electric transmission upgrades in southern New Hampshire, northern Massachusetts and continuing into the greater Boston metropolitan area, of which 28 upgrades are in Eversource's service territory (two in New Hampshire and 26 in Massachusetts). The two New Hampshire upgrades, including the Merrimack Valley Reliability Project, have been placed in service, and 20 Massachusetts upgrades have been placed in service. On December 17, 2019, the Massachusetts Siting Board issued a favorable decision on the Sudbury-Hudson Reliability Project, the last project requiring such approval. On January 17, 2020, the Town of Sudbury and Protect Sudbury, a community group, appealed the decision to the Massachusetts Supreme Judicial Court. The majority of the remaining upgrades are under construction and are expected to be placed in service in 2021. We estimate our portion of the investment will be approximately $750 million, of which $442.2 million has been spent and capitalized through December 31, 2019.

Hartford-Area Transmission Projects: These projects consist of 27 projects in the Hartford, Connecticut area with an expected investment of approximately $350 million. As of December 31, 2019, 24 projects have been placed in service, and three projects are in active construction and are expected to be placed in service through mid-2020. As of December 31, 2019, CL&P had spent and capitalized $275.9 million in costs associated with these projects.

Seacoast Reliability Project: The Seacoast Reliability Project consists of a 13-mile, 115kV transmission line within several New Hampshire communities, using a combination of overhead, underground and underwater line designs to help meet the growing demand for electricity in the Seacoast region. On December 10, 2018, the NHSEC indicated its unanimous approval of the project, and subsequently issued its written decision on January 31, 2019. On May 13, 2019, two appeals of the NHSEC's approval orders were filed with the New Hampshire Supreme Court. On December 17, 2019, the Conservation Law Foundation requested the Court to withdraw its appeal, and the Court granted the request on December 20, 2019. The other appeal remains pending. This project is under construction and is scheduled to be completed in the second quarter of 2020. We estimate the investment will be approximately $125 million, of which PSNH had spent and capitalized $89.0 million in costs through December 31, 2019.

All project costs are anticipated to be fully recoverable through transmission rates.

Distribution Business: A summary of distribution capital expenditures is as follows:

	For the Years Ended December 31,
(Millions of Dollars)	CL&P				NSTAR Electric				PSNH				Total Electric				Natural Gas				Water (1)				Total
2019
Basic Business	$	228.7			$	201.0			$	47.3			$	477.0			$	71.2			$	15.0			$	563.2
Aging Infrastructure	224.5				255.5				90.8				570.8				315.2				93.9				979.9
Load Growth and Other	59.6				89.4				16.8				165.8				66.8				1.5				234.1
Total Distribution	512.8				545.9				154.9				1,213.6				453.2				110.4				1,777.2
Solar	—				7.5				—				7.5				—				—				7.5
Total	$	512.8			$	553.4			$	154.9			$	1,221.1			$	453.2			110.4				$	1,784.7
2018
Basic Business	$	256.3			$	217.7			$	69.3			$	543.3			$	72.9			$	17.0			$	633.2
Aging Infrastructure	151.6				133.3				73.0				357.9				280.2				81.1				719.2
Load Growth and Other	79.7				94.3				15.6				189.6				51.4				3.6				244.6
Total Distribution	487.6				445.3				157.9				1,090.8				404.5				101.7				1,597.0
Solar and Other	—				53.4				0.9				54.3				—				—				54.3
Total	$	487.6			$	498.7			$	158.8			$	1,145.1			$	404.5			$	101.7			$	1,651.3
2017
Basic Business	$	214.0			$	166.1			$	67.2			$	447.3			$	67.7			N/A				$	515.0
Aging Infrastructure	180.7				95.4				87.8				363.9				219.9				N/A				583.8
Load Growth and Other	52.3				96.6				13.2				162.1				47.7				N/A				209.8
Total Distribution	447.0				358.1				168.2				973.3				335.3				N/A				1,308.6
Solar and Other	—				100.1				8.5				108.6				—				N/A				108.6
Total	$	447.0			$	458.2			$	176.7			$	1,081.9			$	335.3			N/A				$	1,417.2

(1)	Our water distribution business was acquired on December 4, 2017. Amounts are immaterial for the year ended December 31, 2017.

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 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.

For the water distribution business, 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 our service territory, including improvements to acquisitions, installation of new services, and interconnections of systems.

Acquisition of Assets of Columbia Gas of Massachusetts: On February 26, 2020, Eversource and NiSource entered into an asset purchase agreement (the Agreement) pursuant to which Eversource would acquire the assets that comprise NiSource’s local gas distribution business, currently doing business as Columbia Gas of Massachusetts (CMA). The purchase price of $1.1 billion includes a target working capital amount that would be adjusted to reflect actual working capital as of the closing date. Eversource would acquire approximately 330,000 residential, commercial, and industrial natural gas customers, as well as over 5,000 miles of natural gas distribution pipeline across more than 60 communities in Massachusetts.

The liabilities to be assumed by Eversource under the Agreement specifically exclude any liabilities (past and future) arising out of or related to the fires and explosions that occurred on September 13, 2018 in Lawrence, Andover and North Andover, Massachusetts related to the delivery of natural gas by CMA, including certain subsequent events, all as described in the DPU's Order on Scope dated December 23, 2019 (D.P.U. 19-141) (the Greater Lawrence Incident or GLI), and any further emergency events prior to the closing of the acquisition related to the restoration and reconstruction with respect to the GLI, including any losses arising out of or related to any litigation, demand, cause of action, claim, suit, investigation, proceeding, indemnification agreements or rights.

The acquisition and resulting rate plan both require DPU and other approvals. Eversource and NiSource expect to close this transaction later this year.

Projected Capital Expenditures: A summary of the projected capital expenditures for the regulated companies' electric transmission and for the total electric distribution, natural gas distribution and water distribution for 2020 through 2024, including information technology and facilities upgrades and enhancements on behalf of the regulated companies, is as follows:

	Years
(Millions of Dollars)	2020				2021				2022				2023				2024				2020 - 2024 Total
CL&P Transmission	$	384			$	209			$	184			$	182			$	141			$	1,100
NSTAR Electric Transmission	366				478				436				296				284				1,860
PSNH Transmission	160				145				235				233				243				1,016
Total Electric Transmission	$	910			$	832			$	855			$	711			$	668			$	3,976
Electric Distribution	$	1,347			$	1,208			$	1,162			$	1,170			$	1,234			$	6,121
Natural Gas Distribution	470				498				501				507				537				2,513
Total Electric and Natural Gas Distribution	$	1,817			$	1,706			$	1,663			$	1,677			$	1,771			$	8,634
Water Distribution	$	124			$	127			$	134			$	147			$	153			$	685
Information Technology and All Other	$	220			$	169			$	165			$	171			$	171			$	896
Total	$	3,071			$	2,834			$	2,817			$	2,706			$	2,763			$	14,191

The projections do not include investments related to offshore wind projects. Actual capital expenditures could vary from the projected amounts for the companies and years above.

Offshore Wind Business: Our offshore wind business includes ownership interests in North East Offshore and Bay State Wind, which together hold PPAs and contracts for the Revolution Wind, South Fork Wind and Sunrise Wind projects, as well as offshore leases through BOEM. Our offshore wind projects are being developed and constructed through a joint and equal partnership with Ørsted. This partnership also participates in opportunities for solicitations for offshore wind energy in the Northeast U.S.

On February 8, 2019, Eversource and Ørsted entered into an equal partnership to acquire key offshore wind assets in the Northeast. Eversource has a 50 percent ownership interest in North East Offshore, which holds the Revolution Wind and South Fork Wind projects, as well as a 257 square-mile lease off the coasts of Massachusetts and Rhode Island. Eversource also has a 50 percent ownership interest in Bay State Wind, which holds the Sunrise Wind project. Bay State Wind's separate 300-square-mile ocean lease is located approximately 25 miles south of the coast of Massachusetts adjacent to the North East Offshore area. In aggregate, the Bay State Wind and the North East Offshore lease sites jointly-owned by Eversource and Ørsted could eventually develop at least 4,000 MW of clean, renewable offshore wind energy. As of December 31, 2019, Eversource's total equity investment balance in its offshore wind business was $649.3 million.

Currently we are developing our construction and operations plans, concluding on final offshore and onshore project designs and working through our siting and permitting processes, all of which is competitively sensitive. Subject to finalization of these plans, designs and processes, all of which are subject to change and modification as a result of our investment decisions, permit approval timelines and final design decisions, we currently expect to make additional investments in our offshore wind business of approximately $300 million to $400 million over the course of 2020.

The following table provides a summary of the Eversource and Ørsted major projects with announced contracts:

Wind Project	State Servicing	Size (MW)	Term (Years)	Price per MWh	Pricing Terms	Projected In-Service Date	Contract Status
Revolution Wind	Rhode Island	400	20	$98.43	Fixed price contract; no price escalation	End of 2023	Approved
Revolution Wind	Connecticut	304	20	(1)	Fixed price contracts; no price escalation	End of 2023	Approved
South Fork Wind	New York (LIPA)	90	20	$160.33	2 percent average price escalation	End of 2022	Approved
South Fork Wind	New York (LIPA)	40	20	$86.25	2 percent average price escalation	End of 2022	(3)
Sunrise Wind	New York (NYSERDA)	880	25	$110.37 (2)	Fixed price contract; no price escalation	End of 2024	Approved

(1)	The pricing for the Revolution Wind contracts in Connecticut has not yet been publicly disclosed.

(2)	Index OREC strike price.

(3)	The Long Island Power Authority (LIPA) agreed to expand the original 20-year PPA from 90 MW to 130 MW through an amendment to the original agreement. Negotiations are currently underway, and a final amendment is expected in the first half of 2020.

On October 23, 2019, the New York State Energy Research and Development Authority (NYSERDA) announced the execution of a 25-year agreement with the Sunrise Wind project to purchase Offshore Wind Renewable Energy Certificates (ORECs) from an 880 MW offshore wind facility. The Sunrise Wind project is held by Bay State Wind and will use a combination of lease areas from Bay State Wind and North East Offshore. Sunrise Wind will be developed 35 miles east of Montauk Point, Long Island.

The completion dates for these projects are subject to federal permitting through BOEM, engineering, state siting and permitting in New York and Rhode Island, and finalizing a PPA amendment in New York. Significant delays in the siting and permitting process, including the timing of obtaining BOEM approval, could adversely impact the timing of these projects' in-service dates. Currently, BOEM has indicated it will complete its Cumulative Impact Study as part of the Draft Supplemental Environmental Impact Statement (EIS) for a non-affiliated offshore wind project during the second quarter of 2020. The study is designed to assess the overall environmental impact of all offshore wind projects. Federal siting and permitting have commenced for the South Fork Wind project, as it has filed its Construction Operations Plan (COP) application with BOEM. South Fork Wind is designated as "FAST-41" by the U.S. Federal Permitting Improvement Council’s FAST-41 infrastructure projects, which provides greater federal assistance associated with program timelines. Revolution Wind and Sunrise Wind COP filings are planned in 2020. South Fork Wind previously filed federal and state applications in 2018. State agencies also will review siting applications for Revolution Wind and Sunrise Wind in New York and Rhode Island, with application filings planned in 2020.

FERC Regulatory Matters

FERC ROE Complaints: Four separate complaints were 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 billed 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.

The ROE originally billed during the period October 1, 2011 (beginning of the first complaint period) 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 the 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 by the U.S. Court of Appeals for the D.C. Circuit (the Court).

All amounts associated with the first complaint period have been refunded. Eversource has recorded a reserve of $39.1 million (pre-tax and excluding interest) for the second complaint period as of December 31, 2019. This 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 December 31, 2019.

On 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. Initial briefs were filed by the NETOs, Complainants and FERC Trial Staff on January 11, 2019 and reply briefs were filed on March 8, 2019. The NETOs' brief was supportive of the overall ROE methodology determined in the October 16, 2018 order provided the FERC does not change the proposed methodology or alter its implementation in a manner that has a material impact on the results.

The FERC order included illustrative calculations for the first complaint using FERC's proposed frameworks with financial data from that complaint. Those illustrative calculations indicated that for the first complaint period, for the NETOs, which FERC concludes are of average financial risk, the preliminary just and reasonable base ROE is 10.41 percent and the preliminary incentive cap on total ROE is 13.08 percent.

If the results of the illustrative calculations were included in a final FERC order for each of the complaint periods, then a 10.41 percent base ROE and a 13.08 percent incentive cap would not have a significant impact on our financial statements for all of the complaint periods. These preliminary calculations are not binding and do not represent what we believe to be the most likely outcome of a final FERC order.

On November 21, 2019, FERC issued an order concerning the transmission ROEs for the Midcontinent ISO transmission owners (MISO). In that order, FERC adopted another new methodology for determining base ROEs for MISO, which differed significantly from the methodology and framework set forth in its October 16, 2018 FERC order on the NETOs’ ROE dockets. On December 23, 2019, the NETOs filed a Supplemental Paper Hearing Brief and a Motion to supplement the record in the NETO ROE dockets to respond to the new methodology proposed in the MISO order, as there is uncertainty to whether it may be applied to the NETOs’ cases. On January 21, 2020, the FERC issued an order granting rehearing for further consideration to give the FERC more time to act on the substantive issues of the MISO ROE proceedings. Further changes to the methodology by FERC are possible as a result of the arguments in both the MISO and NETO proceedings. Given the significant uncertainty relating to the October 2018 FERC order, the November 2019 FERC order to MISO, and the FERC's rehearing of the MISO order, the Company is unable to predict the potential effect of the MISO order on the NETO complaints or the outcome of the four complaints and concluded that there is no reasonable basis for a change to the reserve or recognized ROEs for any of the complaint periods at this time. Further, the Company cannot reasonably estimate a range of gain or loss for any of the four complaint proceedings.

Eversource, CL&P, NSTAR Electric and PSNH 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.

A change of 10 basis points to the base ROE used to establish the reserves would impact Eversource’s after-tax earnings by an average of approximately $3 million for each of the four 15-month complaint periods.

FERC Notices of Inquiry: On March 21, 2019, FERC issued two Notices of Inquiry (NOI) that may affect Eversource transmission ROEs and incentives. One NOI (the "FERC ROE NOI") seeks comments from all stakeholders on FERC's policies for evaluating ROEs for electric public utilities, and interstate natural gas and oil pipelines. The other NOI (the FERC transmission incentives NOI) seeks comments on FERC's policies for implementing electric transmission incentives. On June 26, 2019, the NETOs jointly filed comments in the FERC ROE NOI, supporting the methodology established in the FERC’s October 16, 2018 order with minor enhancements going forward. Also, on June 26, 2019, Eversource filed comments in the FERC transmission incentives NOI, requesting that FERC retain policies that have been effective in encouraging new transmission investment and remain flexible enough to attract investment in new and emerging transmission technologies. The NETOs jointly filed reply comments in the FERC ROE NOI on July 26, 2019. Eversource filed reply comments in the FERC transmission incentives NOI on August 26, 2019. At this time, Eversource cannot predict how these NOIs will affect its ROEs or incentives.

FERC Transmission Rate Settlement: On December 28, 2015, FERC initiated a proceeding to review the NETOs' regional and local transmission formula rates due to a lack of transparency, finding that the formula rates appeared to lack 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 included, among other things, a new formula rate template in which all regional and local transmission revenue requirements will be determined through a single formula rate. The Settlement Agreement was contested by a group of municipal entities and the FERC Trial Staff. On May 22, 2019, FERC rejected the Settlement Agreement and remanded the proceeding for hearings. The parties have been engaged in further settlement negotiations and reached an agreement in principle on October 22, 2019. The FERC Chief Administrative Law Judge has approved two suspensions of the schedule for ninety days each for the NETOs to review the terms with other active parties and finalize the settlement. The procedural schedule has been suspended to April 22, 2020.

U.S. Federal Corporate Income Taxes: Effective January 1, 2018, the local transmission service rates were updated to reflect the lower U.S. federal corporate income tax rate that resulted from the Tax Cuts and Jobs Act. On June 28, 2018, FERC granted a one-time waiver of tariff provisions related to the federal corporate income tax rate so that, effective June 1, 2018, the regional transmission service rates also reflect the reduced federal corporate income tax rate of 21 percent. The local and regional transmission service rates do not currently reflect amortization of excess ADIT (EDIT) balances that resulted from the Act. On November 15, 2018, FERC issued a Policy Statement and a separate Notice of Proposed Rulemaking addressing accounting and rate issues related to ADIT changes resulting from the Act. On November 21, 2019, FERC issued its final rule requiring public utilities with transmission formula rates to make adjustments to ADIT and EDIT. Eversource expects to submit a filing demonstrating its compliance with the final rule in the second half of 2020.

Regulatory Developments and Rate Matters

Electric, Natural Gas and Water Utility Base Distribution Rates: Each Eversource utility subsidiary is subject to the regulatory jurisdiction of the state in which it operates: CL&P, Yankee Gas and Aquarion operate in Connecticut and are subject to PURA regulation; NSTAR Electric, NSTAR Gas and Aquarion operate in Massachusetts and are subject to DPU regulation; and PSNH and Aquarion operate in New Hampshire and are subject to NHPUC regulation. The regulated 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.

In Connecticut, electric and natural gas utilities are required to file a distribution rate case, or for PURA to initiate a rate review, within four years of the last rate case. CL&P's distribution rates were established in an April 2018 PURA-approved rate case settlement agreement with rates effective May 1, 2018. Yankee Gas' distribution rates were established in a December 2018 PURA-approved rate case settlement agreement with rates effective November 15, 2018. Aquarion is not required to initiate a rate review with the PURA. Aquarion rates were established in a 2013 PURA-approved rate case.

In Massachusetts, electric distribution companies are required to file at least one distribution rate case every five years, and natural gas local distribution companies to file at least one distribution rate case every 10 years, and those companies are limited to one settlement agreement in any 10-year period. NSTAR Electric's distribution rates were established in a 2017 DPU-approved rate case with rates effective February 1, 2018.

NSTAR Gas' distribution rates were established in a 2015 DPU-approved rate case. See "Regulatory Developments and Rate Matters - Massachusetts" in this Management's Discussion and Analysis of Financial Condition and Results of Operations, for NSTAR Gas' November 2019 rate case application with the DPU. Aquarion is not required to initiate a rate review with the DPU. Aquarion rates were established in an October 2018 DPU-approved rate case.

In New Hampshire, PSNH's temporary distribution rates were established in a settlement agreement approved by the NHPUC on June 27, 2019, with temporary rates effective July 1, 2019. On May 28, 2019, PSNH filed an application with the NHPUC for a permanent increase in base distribution rates, effective July 1, 2020. See "Regulatory Developments and Rate Matters - New Hampshire" in this Management's Discussion and Analysis of Financial Condition and Results of Operations, for more information. Aquarion rates were established in a 2013 NHPUC-approved rate case, further revised in 2016. In a 2019 settlement approved by the NHPUC, Aquarion was ordered to file its next full rate proceeding no later than 2020.

Electric, Natural Gas and Water Utility Retail Rates: The Eversource electric distribution companies obtain and resell power to retail customers who choose not to buy energy from a competitive energy supplier. The natural gas distribution companies procure natural gas for firm and seasonal customers. These energy supply procurement costs are recovered from customers in energy supply rates that are approved by the respective state regulatory commission. The rates are reset periodically and are fully reconciled to their costs. Each electric and natural gas distribution company fully recovers its energy supply costs through approved regulatory rate mechanisms on a timely basis and, therefore, such costs have no impact on earnings.

The electric and natural gas distribution companies also recover certain other costs on a fully reconciling basis through regulatory commission-approved cost tracking mechanisms and, therefore, recovery of these costs have no impact on earnings. Costs recovered through cost tracking mechanisms include, among others, energy efficiency program costs, electric retail transmission charges, electric restructuring and stranded costs (including securitized RRB charges), and additionally for our Massachusetts companies, pension and PBOP benefits and net metering for distributed generation. The reconciliation filings compare the total actual costs allowed to revenue requirements related to these services and the difference between the costs incurred (or the rate recovery allowed) and the actual costs allowed is deferred and included, to be either recovered or refunded, in future customer rates. These cost tracking mechanisms also include certain incentives earned, return on rate base, and carrying charges that are billed in rates to customers, which do impact earnings.

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 and (2) the reduction in ADIT liabilities (now excess ADIT or EDIT), which are estimated to be approximately $2.8 billion and are included in regulatory liabilities as of December 31, 2019. The refund of these EDIT regulatory liabilities to customers will generally be made over the same period as the remaining useful lives of the underlying assets that gave rise to the ADIT liabilities. The refund of EDIT has begun at most of our distribution companies and is reflected in rates. The refund to customers and resulting amortization of the EDIT regulatory liabilities results in lower Revenues on the statements of income and lower current tax expense. This is offset by the reduction to Income Tax Expense due to the amortization of the EDIT. The refund of EDIT results in a lower effective tax rate and no impact on net income.

Eversource established a regulatory 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 reflected the lower federal tax rate. As of December 31, 2019, this liability, net of amounts refunded to customers, was $14.6 million.

Eversource's regulated companies are in the process of, or will, refund the decrease in the income tax rate based on orders issued by applicable state and federal regulatory commissions. A summary of the timing of refunds related to the change in the tax rate is as follows:

Eversource Utility and Jurisdiction		EDIT Refund Timing		Effective Date of January 1, 2018 Tax Rate Reflected in Rates
Connecticut
CL&P		Reflected in rates effective May 1, 2019		May 1, 2018
Yankee Gas		Reflected in rates effective November 15, 2018		November 15, 2018
Massachusetts
NSTAR Electric		Reflected in rates effective January 1, 2019		February 1, 2018
NSTAR Gas		Reflected in rates effective February 1, 2019		July 1, 2018
New Hampshire
PSNH		Refunds for EDIT are being addressed in permanent distribution rate case filing Refunds for EDIT related to PSNH's divested generation assets reflected in rates effective August 1, 2018		July 1, 2019 for distribution
Transmission
CL&P, NSTAR Electric and PSNH		Refunds for EDIT will be made based on November 2019 final ruling from FERC. Eversource expects to submit a filing demonstrating its compliance with the final rule in the second half of 2020.		January 1, 2018 for local transmission service and June 1, 2018 for regional transmission service

Connecticut:

CL&P Storm Filing: CL&P's approved rate case settlement in 2018 incorporated $18.6 million of rate base recovery for catastrophic storms occurring after December 31, 2016, subject to a future storm filing. On November 16, 2018, CL&P filed for recovery of $153 million of storm costs incurred from October 2017 through May 2018, with recovery over six years to begin May 1, 2019. Through the course of the proceeding, CL&P updated its request to $145.5 million to reflect final invoicing and capitalization amounts. On April 17, 2019, PURA authorized recovery of $141.0 million as part of storm cost recovery and the remainder to be recorded to plant or other balance sheet accounts.

Massachusetts:

NSTAR Electric Distribution Rates: As part of an inflation-based mechanism, NSTAR Electric submitted its second annual Performance Based Rate Adjustment filing on September 16, 2019 and the DPU approved a $33.6 million increase to base distribution rates on December 19, 2019 for effect on January 1, 2020.

NSTAR Gas Rate Case: On November 8, 2019, NSTAR Gas filed its application with the DPU, which sought a distribution rate increase of $38.0 million effective October 1, 2020. As part of this filing, NSTAR Gas also proposed to continue its ongoing Gas System Enhancement Program (GSEP), include the GSEP investments since 2015 into base rates, and implement a performance-based ratemaking plan. A final decision from the DPU is expected by September 30, 2020.

Hingham Vote to Acquire Water System: On April 22, 2019, the town of Hingham, Massachusetts voted to acquire the water system and treatment plant that supplies water to the towns of Hingham, Hull and North Cohasset. The acquisition price is currently estimated to be more than $100 million, subject to adjustment based on actual capital investments as legally required and other future closing adjustments. Aquarion will continue to operate the water system consistent in all material respects with its obligations under applicable law during the transition period, until the sale closes. The Company is evaluating the impact of the sale on its financial statements, which will be recorded when the sale transaction closes. No loss is expected upon the ultimate conclusion of this transaction. The transaction is expected to close in the second half of 2020. As of December 31, 2019, these water distribution assets were included within Property, Plant and Equipment, Net and goodwill on the balance sheet and were also reflected in the Water Distribution segment and reporting unit.

New Hampshire:

Distribution Rates: On April 26, 2019, PSNH filed an application with the NHPUC for approval of a temporary annual base distribution rate increase of approximately $33 million, effective July 1, 2019. On June 27, 2019, the NHPUC approved a settlement agreement that was reached by PSNH, the NHPUC Staff, the Office of the Consumer Advocate, and another settling party, to implement a temporary annual base distribution rate increase of $28.3 million. Although new rates were implemented on August 1, 2019 to customers, the provisions of the temporary base distribution rate increase were effective July 1, 2019. The settlement agreement also permits PSNH to recover approximately $68.5 million in unrecovered storm costs over a five-year period beginning August 1, 2019, with debt carrying charges, which is included in the temporary rate increase.

On May 28, 2019, PSNH filed an application with the NHPUC for a permanent increase in base distribution rates of approximately $70 million, effective July 1, 2020, which includes the temporary rate increase request. The temporary rates are subject to reconciliation based on the outcome of the permanent rate case now before the NHPUC. The NHPUC is permitted up to twelve months to adjudicate the permanent rate application from the date of filing. A decision by the NHPUC is expected in the second quarter of 2020.

2013 through 2016 Storm Costs: On March 26, 2019, the NHPUC approved the recovery of $38.1 million, plus carrying charges, of storm costs incurred from December 2013 through April 2016 and the transfer of funding from PSNH’s major storm reserve to recover 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. As a result of the duration of time between incurring storm costs in December 2013 through April 2016 and final approval from the NHPUC in 2019, PSNH recognized $5.2 million (pre-tax) for the equity return component of the carrying charges within Other Income, Net on the statement of income in 2019, which has been collected from customers. Also included in the March 26, 2019 NHPUC approval is a prospective requirement for PSNH to annually net its storm funding reserve collected from customers against deferred storm costs.

Legislative and Policy Matters

New Hampshire: On July 8, 2019, the New Hampshire Superior Court approved a settlement between PSNH and the Town of Bow, New Hampshire, where the town had over-assessed the value of the property owned by PSNH for the 2014 through 2018 property tax years. The result of this settlement was $10.0 million in over-paid property taxes, of which PSNH has received $4.25 million in cash through December 31, 2019. PSNH will receive the balance thereafter to be credited against future property taxes payable, annually through 2023.

In addition, PSNH reached a collective resolution with an additional 61 municipalities for an aggregate total of approximately $7 million, where the towns had over-assessed the value of the property owned by PSNH for the 2015 through 2017 property tax years.

Federal: On December 20, 2019, the "Further Consolidated Appropriations Act, 2020," became law, which provided a one-year extension of the production tax credit or the investment tax credit for renewable wind projects under Section 45 of the Internal Revenue Code of 1986 on which construction begins before January 1, 2021. If construction begins on a qualifying wind project in 2020, the project will qualify for a production tax credit of $15 per MWh or an 18 percent investment tax credit.

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 discusses with the Audit Committee of our Board of Trustees significant matters relating to critical accounting policies. Our critical accounting policies are discussed below. See the combined notes to our financial statements for further information concerning the accounting policies, estimates and assumptions used in the preparation of our financial statements.

Regulatory Accounting: Our regulated 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 regulated companies' financial statements reflect the effects of the rate-making process. The rates charged to the customers of our regulated companies are designed to collect each company's costs to provide service, plus a return on investment.

The application of accounting guidance for rate-regulated enterprises results in recording regulatory assets and liabilities. Regulatory assets represent the deferral of incurred costs that are probable of future recovery in customer rates. Regulatory assets are amortized as the incurred costs are recovered through customer rates. In some cases, we record regulatory assets before approval for recovery has been received from the applicable regulatory commission. We must use judgment to conclude that costs deferred as regulatory assets are probable of future recovery. We base our conclusion on certain factors, including, but not limited to, regulatory precedent. Regulatory liabilities represent either revenues received from customers to fund expected costs that have not yet been incurred or probable future refunds to customers.

We use judgment when recording regulatory assets and liabilities; however, regulatory commissions can reach different conclusions about the recovery of costs, and those conclusions could have a material impact on our financial statements. We believe it is probable that each of the regulated companies will recover the regulatory assets that have been recorded. If we determine that we can no longer apply the accounting guidance applicable to rate-regulated enterprises to our operations, or that we cannot conclude it is probable that costs will be recovered from customers in future rates, the costs would be charged to net income in the period in which the determination is made.

Pension, SERP and PBOP: We sponsor Pension, SERP and PBOP Plans to provide retirement benefits to our employees. For each of these plans, several significant assumptions are used to determine the projected benefit obligation, funded status and net periodic benefit cost. These assumptions include the expected long-term rate of return on plan assets, discount rate, compensation/progression rate and mortality and retirement assumptions. We evaluate these assumptions at least annually and adjust them as necessary. Changes in these assumptions could have a material impact on our financial position, results of operations or cash flows.

Expected Long-Term Rate of Return on Plan Assets: In developing the expected long-term rate of return, we consider historical and expected returns, as well as input from our consultants. Our expected long-term rate of return on assets is based on assumptions regarding target asset allocations and corresponding expected rates of return for each asset class. We routinely review the actual asset allocations and periodically rebalance the investments to the targeted asset allocations when appropriate. For the year ended December 31, 2019, our expected long-term rate-of-return assumption used to determine our pension and PBOP expense was 8.25 percent for the Eversource Service plans and 7 percent for the Aquarion plans. For the forecasted 2020 pension and PBOP expense, an expected long-term rate of return of 8.25 percent for the Eversource Service plans and 7 percent for the Aquarion plans will be used reflecting our target asset allocations.

Discount Rate: Payment obligations related to the Pension, SERP and PBOP Plans are discounted at interest rates applicable to the expected timing of each plan's cash flows. The discount rate that was utilized in determining the pension, SERP and PBOP obligations was based on a yield-curve approach. This approach utilizes a population of bonds with an average rating of AA based on bond ratings by Moody's, S&P and Fitch, and uses bonds with above median yields within that population. As of December 31, 2019, the discount rates used to determine the funded status were within a range of 3.04 percent to 3.35 percent for the Pension and SERP Plans, and within a range of 3.26 percent to 3.28 percent for the PBOP Plans. As of December 31, 2018, the discount rates used were within a range of 4.22 percent to 4.45 percent for the Pension and SERP Plans, and within a range of 4.38 percent to 4.41 percent for the PBOP Plans. The decrease in the discount rates used to calculate the funded status resulted in an increase to the Pension and PBOP Plans' liability of $813.1 million and $88.6 million, respectively, as of December 31, 2019.

The Company uses the spot rate methodology for the service and interest cost components of Pension, SERP and PBOP expense because it provides a more precise measurement by matching projected cash flows to the corresponding spot rates on the yield curve. The discount rates used to estimate the 2019 expense were within a range of 2.63 percent to 3.55 percent for the Pension and SERP Plans, and within a range of 3.85 percent to 4.65 percent for the PBOP Plans.

Mortality Assumptions: Assumptions as to mortality of the participants in our Pension, SERP and PBOP Plans are a key estimate in measuring the expected payments a participant may receive over their lifetime and the corresponding plan liability we need to record. In 2019, a revised scale for the mortality table was released, and we utilized it in our measurements.

Compensation/Progression Rate: This assumption reflects the expected long-term salary growth rate, including consideration of the levels of increases built into collective bargaining agreements, and impacts the estimated benefits that Pension and SERP Plan participants receive in the future. As of December 31, 2019 and 2018, the compensation/progression rate used to determine the funded status was 3.50 percent for the Eversource Service plans and 4 percent for the Aquarion plans.

Health Care Cost: The Eversource Service PBOP Plan is not subject to health care cost trends. As of December 31, 2019, for the Aquarion PBOP Plan, the health care cost trend rate is a range of 3.5 percent to 6.5 percent, with an ultimate rate of 3.5 percent to 5 percent in 2019 and 2023, for post-65 and pre-65 retirees, respectively.

Actuarial Determination of Expense: Pension, SERP and PBOP expense is determined by our actuaries and consists of service cost and prior service cost, interest cost based on the discounting of the obligations, and amortization of actuarial gains and losses, offset by the expected return on plan assets. Actuarial gains and losses represent the amortization of differences between assumptions and actual information or updated assumptions. Pre-tax net periodic benefit expense for the Pension and SERP Plans was $63.7 million, $39.6 million and $64.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. For the PBOP Plans, there was net periodic PBOP income of $41.5 million, $45.0 million and $39.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.

The expected return on plan assets is determined by applying the assumed long-term rate of return to the Pension and PBOP Plan asset balances. This calculated expected return is compared to the actual return or loss on plan assets at the end of each year to determine the investment gains or losses to be immediately reflected in unamortized actuarial gains and losses.

Forecasted Expenses and Expected Contributions: We estimate that expense in 2020 for the Pension and SERP Plans will be approximately $53 million and income in 2020 for the PBOP Plans will be approximately $52 million. Pension, SERP and PBOP expense for subsequent years will depend on future investment performance, changes in future discount rates and other assumptions, and various other factors related to the populations participating in the plans.

Our policy is to fund the Pension Plans annually in an amount at least equal to the amount that will satisfy all federal funding requirements. We contributed $112.5 million to the Pension Plans in 2019. We currently estimate contributing $105.0 million to the Pension Plans in 2020.

It is our policy to fund the PBOP Plans annually through tax deductible contributions to external trusts. We contributed $9.3 million to the PBOP Plans in 2019. We currently estimate contributing $2.9 million to the PBOP Plans in 2020.

Sensitivity Analysis: The following represents the hypothetical increase to the Pension Plans' (excluding the SERP Plans) reported annual cost and a decrease to the PBOP Plans' reported annual income as a result of a change in the following assumptions by 50 basis points:

(Millions of Dollars)	Increase in Pension Plan Cost								Decrease in PBOP Plan Income
Assumption Change	As of December 31,								As of December 31,
Eversource	2019				2018				2019				2018
Lower expected long-term rate of return	$	22.9			$	23.7			$	4.1			$	4.5
Lower discount rate	21.7				25.5				1.7				2.9
Higher compensation rate	8.7				6.8				N/A				N/A

Goodwill: We recorded goodwill on our balance sheet associated with previous mergers and acquisitions, which totaled $4.4 billion as of December 31, 2019. We have identified our reporting units for purposes of allocating and testing goodwill as Electric Distribution, Electric Transmission, Natural Gas Distribution and Water Distribution. Electric Distribution and Electric Transmission reporting units include carrying values for the respective components of CL&P, NSTAR Electric and PSNH. The Natural Gas Distribution reporting unit includes the carrying values of NSTAR Gas and Yankee Gas. The Water Distribution reporting unit includes the Aquarion water utility businesses. As of December 31, 2019, goodwill was allocated to the reporting units as follows: $2.5 billion to Electric Distribution, $0.6 billion to Electric Transmission, $0.4 billion to Natural Gas Distribution and $0.9 billion to Water Distribution.

We are required to test goodwill balances for impairment at least annually by considering the fair values of the reporting units, which requires us to use estimates and judgments. We have selected October 1st of each year as the annual goodwill impairment testing date. Goodwill impairment is deemed to exist if the carrying amount of a reporting unit exceeds its estimated fair value and if the implied fair value of goodwill based on the estimated fair values of the reporting units' assets and liabilities is less than the carrying amount of the goodwill. If goodwill were deemed to be impaired, it would be written down in the current period to the extent of the impairment.

We performed an impairment test of goodwill as of October 1, 2019 for the Electric Distribution, Electric Transmission, Natural Gas Distribution and Water Distribution reporting units. This evaluation required the consideration of several factors that impact the fair value of the reporting units, including conditions and assumptions that affect the future cash flows of the reporting units. Key considerations include discount rates, utility sector market performance and merger transaction multiples, and internal estimates of future cash flows and net income.

The 2019 goodwill impairment test resulted in a conclusion that goodwill is not impaired and no reporting unit is at risk of a goodwill impairment. The fair value of the reporting units was substantially in excess of carrying value.

Long-Lived Assets: Impairment evaluations of long-lived assets, including property, plant and equipment and other assets, involve a significant degree of estimation and judgment, including identifying circumstances that indicate an impairment may exist. Impairment analysis is required when events or changes in circumstances indicate that the carrying value of a long-lived asset may not be recoverable. Indicators of potential impairment include a deteriorating business climate, unfavorable regulatory action, decline in value that is other than temporary in nature, plans to dispose of a long-lived asset significantly before the end of its useful life, and accumulation of costs that are in excess of amounts allowed for recovery. The review of long-lived assets for impairment utilizes significant assumptions about operating strategies and external developments, including assessment of current and projected market conditions that can impact future cash flows.

Impairment of Northern Pass Transmission: Northern Pass was Eversource's planned 1,090 MW HVDC transmission line that would have interconnected 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 a result of a final decision received on July 19, 2019 from the New Hampshire Supreme Court, whereby the court denied Northern Pass’ appeal and affirmed the NHSEC’s denial of Northern Pass’ siting application on NPT, Eversource concluded that construction of NPT was no longer probable and that there was no constructive path forward for the project. Eversource terminated the project and permanently abandoned any further development. As a result, substantially all of the capitalized project costs, which totaled $318 million, certain of which are subject to cost reimbursement agreements, were impaired.

Based on the conclusion that the construction of Northern Pass was no longer probable, Eversource recorded an impairment charge in 2019 for all of the project costs associated with Northern Pass, which were primarily engineering design, siting, permitting and legal costs, along with appropriate allowances for funds used during construction, and recognized a receivable for certain cost reimbursement agreements. Additionally, Eversource recorded an impairment charge associated with the land acquired to construct Northern Pass in order to recognize the land at its estimated fair value based on assessed values and transaction costs. In total, this resulted in a pre-tax impairment charge of $239.6 million within Operating Income on the statement of income for the year ended December 31, 2019, and was reflected in the Electric Transmission segment. The after-tax impact of the impairment charge was $204.4 million, or $0.64 per share, after giving effect to the estimated fair value of the related land, reimbursement agreements, and the impact of expected income tax benefits associated with the impairment charge. As a result of the decision to terminate the NPT project and permanently abandon any further development, Eversource does not expect any future cash expenditures associated with this project.

Equity Method Investments: Investments in affiliates where we have the ability to exercise significant influence, but not control, over an investee are initially recognized as an equity method investment at cost. Any differences between the cost of an investment and the amount of underlying equity in net assets of an investee are considered basis differences, and are determined based upon the estimated fair values of the investee's identifiable assets and liabilities. For our offshore wind equity method investment, basis differences are related to intangible assets for PPAs that will be amortized over the term of the PPAs, and equity method goodwill that are not amortized. Capitalized interest associated with our offshore wind equity method investment is included in the investment balance.

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 an estimate of undiscounted future cash flows.

Eversource recorded an other-than-temporary impairment of $32.9 million within Other Income, Net on our statement of income in 2018, related to Access Northeast, an equity method investment. In September 2018, a series of non-Eversource natural gas explosions in eastern Massachusetts resulted in widespread property and system damage, personal injuries, and a fatality. Eversource identified the September 2018 natural gas series of explosions, compounded by the adverse legislative environment, as negative evidence that indicated potential impairment of our investment in Access Northeast. Our impairment assessment used a discounted cash flow approach, including consideration of the severity and duration of any decline in fair value of our investment in the project, and involved significant management judgment and estimation, including projections of the project’s discounted cash flows and assumptions about exit price. In the third quarter of 2018, management determined that the future cash flows of the Access Northeast project were uncertain and could no longer be reasonably estimated and that the book value of our equity method investment was not recoverable. On April 1, 2019, pursuant to a provision in the partnership agreement jointly entered into by Eversource, Enbridge, Inc. and National Grid plc, through Algonquin Gas Transmission, LLC, the Access Northeast project was terminated.

Income Taxes: Income tax expense is estimated for each of the jurisdictions in which we operate and is recorded each quarter using an estimated annualized effective tax rate. This process to record income tax expense involves estimating current and deferred income tax expense or benefit and the impact of temporary differences resulting from differing treatment of items for financial reporting and income tax return reporting purposes. Such differences are the result of timing of the deduction for expenses, as well as any impact of permanent differences, non-tax deductible expenses, or other items that directly impact income tax expense as a result of regulatory activity (flow-through items). The temporary differences and flow-through items result in deferred tax assets and liabilities that are included in the balance sheets.

We also account for uncertainty in income taxes, which applies to all income tax positions previously filed in a tax return and income tax positions expected to be taken in a future tax return that have been reflected on our balance sheets. The determination of whether a tax position meets the recognition threshold under applicable accounting guidance is based on facts and circumstances available to us.

On December 22, 2017, the Tax Cuts and Jobs Act became law, which amended existing federal tax rules and included numerous provisions that impacted corporations. In particular, the act reduced 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 and (2) the reduction in ADIT liabilities (now excess ADIT or EDIT), which are estimated to be approximately $2.8 billion and are included in regulatory liabilities as of December 31, 2019. Eversource's regulated companies are in the process of, or will be, refunding the EDIT liabilities to customers based on orders issued by applicable state regulatory commissions. The refund of these regulatory liabilities to customers will generally be made over the same period as the remaining useful lives of the underlying assets that gave rise to the ADIT liabilities.

Accounting for Environmental Reserves: Environmental reserves are accrued when assessments indicate it is probable that a liability has been incurred and an amount can be reasonably estimated. Increases to estimates of environmental liabilities could have an adverse impact on earnings. We estimate these liabilities based on findings through various phases of the assessment, considering the most likely action plan from a variety of available remediation options (ranging from no action required to full site remediation and long-term monitoring), current site information from our site assessments, remediation estimates from third party engineering and remediation contractors, and our prior experience in remediating contaminated sites. If a most likely action plan cannot yet be determined, we estimate the liability based on the low end of a range of possible action plans. A significant portion of our environmental sites and reserve amounts relate to former MGP sites that were operated several decades ago and manufactured natural 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 we may have potential liability. Estimates are based on the expected remediation plan. Our estimates are subject to revision in future periods based on actual costs or new information from other sources, including the level of contamination at the site, the extent of our responsibility or the extent of remediation required, recently enacted laws and regulations or a change in cost estimates due to certain economic factors.

Fair Value Measurements: We follow fair value measurement guidance that defines fair value as the price that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). We have applied this guidance to our Company's derivative contracts that are not elected or designated as "normal purchases or normal sales" (normal), to marketable securities held in trusts, and to our investments in our Pension and PBOP Plans. Fair value measurements are also incorporated into the accounting for goodwill, long-lived assets and AROs. We also applied this guidance in the valuation of our basis differences in our equity method offshore wind investments. The fair value measurement guidance was also applied in estimating the fair value of preferred stock, long-term debt and RRBs.

Changes in fair value of the derivative contracts are recorded as Regulatory Assets or Liabilities, as we recover the costs of these contracts in rates charged to customers. These valuations are sensitive to the prices of energy and energy-related products in future years for which markets have not yet developed and assumptions are made.

We use quoted market prices when available to determine the fair value of financial instruments. If quoted market prices are not available, fair value is determined using quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments that are not active and model-derived valuations. When quoted prices in active markets for the same or similar instruments are not available, we value derivative contracts using models that incorporate both observable and unobservable inputs. Significant unobservable inputs utilized in the models include energy and energy-related product prices for future years for long-dated derivative contracts and market volatilities. Discounted cash flow valuations incorporate estimates of premiums or discounts, reflecting risk-adjusted profit that would be required by a market participant to arrive at an exit price, using available historical market transaction information. Valuations of derivative contracts also reflect our estimates of nonperformance risk, including credit risk.

Other Matters

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

Contractual Obligations and Commercial Commitments: Information regarding our contractual obligations and commercial commitments as of December 31, 2019, is summarized annually through 2024 and thereafter as follows:

Eversource
(Millions of Dollars)	2020				2021				2022				2023				2024				Thereafter				Total
Long-term debt maturities (a)	$	296.1			$	1,033.6			$	1,188.9			$	1,665.2			$	1,049.8			$	8,447.8			$	13,681.4
Rate reduction bond maturities	43.2				43.2				43.2				43.2				43.2				367.3				583.3
Estimated interest payments on existing debt (b)	511.5				493.4				458.4				425.5				384.1				4,020.3				6,293.2
Operating leases (c)	10.2				9.0				7.4				4.9				2.8				28.9				63.2
Finance leases(c)	3.4				2.9				1.5				0.8				0.8				13.1				22.5
Funding of pension obligations (d) (e)	105.0				—				—				—				—				—				105.0
Funding of PBOP obligations (d) (e)	2.9				—				—				—				—				—				2.9
Estimated future annual long-term contractual costs (f)	998.8				941.6				946.5				897.5				881.9				4,785.2				9,451.5
Total (g)	$	1,971.1			$	2,523.7			$	2,645.9			$	3,037.1			$	2,362.6			$	17,662.6			$	30,203.0

CL&P
(Millions of Dollars)	2020				2021				2022				2023				2024				Thereafter				Total
Long-term debt maturities (a)	$	—			$	—			$	—			$	400.0			$	139.8			$	2,975.5			$	3,515.3
Estimated interest payments on existing debt (b)	153.2				153.2				153.2				148.2				143.2				2,016.2				2,767.2
Operating leases (c)	0.5				0.2				—				—				—				0.1				0.8
Finance leases (c)	2.0				1.5				—				—				—				—				3.5
Funding of pension obligations (d) (e)	23.2				—				—				—				—				—				23.2
Estimated future annual long-term contractual costs (f)	558.2				547.9				602.7				614.3				605.8				2,875.9				5,804.8
Total (g)	$	737.1			$	702.8			$	755.9			$	1,162.5			$	888.8			$	7,867.7			$	12,114.8

(a)	Long-term debt maturities exclude the CYAPC pre-1983 spent nuclear fuel obligation, net unamortized premiums, discounts and debt issuance costs, and other fair value adjustments.

(b)	Estimated interest payments on fixed-rate debt are calculated by multiplying the coupon rate on the debt by its scheduled notional amount outstanding for the period of measurement.

(c)	The operating and finance lease obligations include interest.

(d)	Amounts are not included on our balance sheets.

(e)	These amounts represent expected pension and PBOP contributions for 2020. Future contributions will vary depending on many factors, including the performance of existing plan assets, valuation of the plans' liabilities and long-term discount rates.

(f)	Other than certain derivative contracts held by the regulated companies, these obligations are not included on our balance sheets.

(g)

Does not include other long-term liabilities recorded on our balance sheet, such as environmental reserves, employee medical insurance, workers compensation and long-term disability insurance reserves, ARO liability reserves and other reserves, as we cannot make reasonable estimates of the timing of payments. Also, does not include amounts not included on our balance sheets for future funding of Eversource's equity method investments, as we cannot make reasonable estimates of the periods or the investment contributions.

For further information regarding our contractual obligations and commercial commitments, see Note 7, "Asset Retirement Obligations," Note 8, "Short-Term Debt," Note 9, "Long-Term Debt," Note 10, "Rate Reduction Bonds and Variable Interest Entities," Note 11A, "Employee Benefits - Pension Benefits and Postretirement Benefits Other Than Pension," Note 13, "Commitments and Contingencies," and Note 15, "Leases," to the financial statements.

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 years ended December 31, 2019 and 2018 included in this Annual Report on Form 10-K:

	For the Years Ended December 31,
(Millions of Dollars)	2019				2018				Increase/(Decrease)
Operating Revenues	$	8,526.5			$	8,448.2			$	78.3
Operating Expenses:
Purchased Power, Fuel and Transmission	3,040.2				3,139.0				(98.8		)
Operations and Maintenance	1,363.1				1,335.2				27.9
Depreciation	885.3				819.9				65.4
Amortization	195.4				252.0				(56.6		)
Energy Efficiency Programs	501.4				472.4				29.0
Taxes Other Than Income Taxes	711.0				729.8				(18.8		)
Impairment of Northern Pass Transmission	239.6				—				239.6
Total Operating Expenses	6,936.0				6,748.3				187.7
Operating Income	1,590.5				1,699.9				(109.4		)
Interest Expense	533.2				498.8				34.4
Other Income, Net	132.8				128.4				4.4
Income Before Income Tax Expense	1,190.1				1,329.5				(139.4		)
Income Tax Expense	273.5				289.0				(15.5		)
Net Income	916.6				1,040.5				(123.9		)
Net Income Attributable to Noncontrolling Interests	7.5				7.5				—
Net Income Attributable to Common Shareholders	$	909.1			$	1,033.0			$	(123.9	)

Operating Revenues

Sales Volumes: A summary of our retail electric GWh sales volumes, our firm natural gas MMcf sales volumes, and our water MG sales volumes, and percentage changes, is as follows:

	Electric									Firm Natural Gas									Water
	Sales Volumes (GWh)						Percentage Decrease			Sales Volumes (MMcf)						Percentage Increase			Sales Volumes (MG)						Percentage Decrease
	2019			2018 (1)				2019			2018 (2)				2019			2018
Traditional	7,685			7,915			(2.9	)%		—			—			—	%		2,161			2,252			(4.0	)%
Decoupled and Special Contracts (3)	43,934			45,466			(3.4	)%		107,806			105,957			1.7	%		21,370			21,479			(0.5	)%
Total Sales Volumes	51,619			53,381			(3.3	)%		107,806			105,957			1.7	%		23,531			23,731			(0.8	)%

(1)	Effective February 1, 2018, NSTAR Electric operated entirely under a decoupled rate structure. The 2018 sales volumes for NSTAR Electric have been recast to present January 2018 as decoupled to conform to the current year presentation.

(2)	Effective November 15, 2018, Yankee Gas operated under a decoupled rate structure. The 2018 sales volumes for Yankee Gas have been recast to present 2018 as decoupled to conform to the current year presentation.

(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.

Weather, fluctuations in energy supply costs, conservation measures (including utility-sponsored energy efficiency programs), and economic conditions affect customer energy 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 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 PSNH impact earnings ("Traditional" in the table above). For CL&P, NSTAR Electric, Yankee Gas, 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). These distribution revenues are decoupled from their customer sales volumes, which breaks the relationship between sales volumes and revenues recognized. Fluctuations in water sales volumes largely do not impact earnings as our Connecticut water distribution business is also decoupled.

Operating Revenues: Operating Revenues by segment increased/(decreased) in 2019, as compared to 2018, as follows:

(Millions of Dollars)	Increase/(Decrease)
Electric Distribution	$	19.3
Natural Gas Distribution	40.0
Electric Transmission	102.7
Water Distribution	2.6
Other	92.2
Eliminations	(178.5		)
Total Operating Revenues	$	78.3

Electric and Natural Gas Distribution Revenues:

Base Distribution Revenues:

•

Base electric distribution revenues increased $107.7 million in 2019, as compared to 2018, due primarily to the impact of CL&P's base distribution rate increases effective May 1, 2019 and May 1, 2018, which include recovery of storm costs and certain other items that do not impact earnings, an NSTAR Electric base distribution rate increase effective January 1, 2019, and a PSNH temporary base distribution rate increase effective July 1, 2019.

•	Base natural gas distribution revenues increased $7.6 million in 2019, as compared to 2018, due primarily to the impact of the Yankee Gas base distribution rate increase effective November 15, 2018.

Tracked Distribution Revenues: Tracked distribution revenues consist of certain costs that are recovered from customers in retail rates through regulatory commission-approved cost tracking mechanisms and therefore, recovery of these costs has no impact on earnings. Costs recovered through cost tracking mechanisms include, among others, energy supply and natural gas supply procurement and other energy-related costs, and electric retail transmission charges, which decreased significantly due primarily to the lower federal corporate income tax rate that was reflected effective January 1, 2019. In addition, cost tracking mechanisms include energy efficiency program costs, electric restructuring and stranded cost recovery revenues (including securitized RRB charges), and additionally for NSTAR Electric, pension and PBOP benefits and net metering for distributed generation. Tracked revenues also include wholesale market sales transactions, such as sales of energy and energy-related products into the ISO-NE wholesale electricity market and the sale of RECs to various counterparties. However, tracked revenues do include certain incentives earned, return on rate base, and carrying charges that are billed in rates to customers, which do impact earnings.

Tracked distribution revenues increased/(decreased) in 2019, as compared to 2018, due primarily to the following:

(Millions of Dollars)	Electric Distribution				Natural Gas Distribution
Retail Tariff Tracked Revenues
Energy supply procurement	$	—			$	24.2
Retail transmission (1)	(123.3		)		N/A
Other distribution tracking mechanisms	18.7				13.8
Wholesale Market Sales Revenue	36.2				(2.1		)

(1) The decrease reflects a decrease in the retail transmission rate billed to customers that was adjusted on January 1, 2019 to reflect the lower federal corporate income tax rate.

Electric Transmission Revenues: Electric transmission revenues increased $102.7 million in 2019, as compared to 2018, due primarily to continued investment in our transmission infrastructure and a higher recovery of tracked costs.

Other Revenues and Eliminations: Other revenues primarily include the revenues of Eversource's service company, most of which are eliminated in consolidation. Eliminations are also 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.

Purchased Power, Fuel and Transmission expense includes costs associated with purchasing electricity and natural gas on behalf of our customers. These electric and natural gas supply costs are recovered from customers in rates through commission-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power, Fuel and Transmission expense increased/(decreased) in 2019, as compared to 2018, due primarily to the following:

(Millions of Dollars)	Increase/(Decrease)
Electric Distribution	$	88.1
Natural Gas Distribution	21.8
Transmission	(124.4		)
Eliminations	(84.3		)
Total Purchased Power, Fuel and Transmission	$	(98.8	)

The increase in purchased power expense at the electric distribution business in 2019 as compared to 2018, was driven primarily by a new zero-carbon power purchase agreement entered into in 2019, as required by regulation in Connecticut, from which the energy purchased from Millstone Nuclear Power Station is sold into the market. Additionally, as a result of the sale of PSNH's thermal generation assets on January 10, 2018, and the sale of PSNH's hydroelectric assets on August 26, 2018, PSNH purchased power in place of its self-generation output. The increase in natural gas supply costs at our natural gas distribution business was due primarily to higher average sales volumes.

The decrease in transmission costs in 2019, as compared to 2018, 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, and a decrease in costs billed by ISO-NE that support regional grid investments. The retail transmission rate was adjusted on January 1, 2019 to reflect the lower federal corporate income tax rate, resulting in a decrease in the cost of retail transmission service. This was partially offset by an increase in Local Network Service charges, which reflect the cost of transmission service provided by Eversource over our local transmission network.

Operations and Maintenance expense includes tracked costs and costs that are part of base electric, natural gas and water distribution rates with changes impacting earnings (non-tracked costs). Operations and Maintenance expense increased/(decreased) in 2019, as compared to 2018, due primarily to the following:

(Millions of Dollars)	Increase/(Decrease)
Base Electric Distribution (Non-Tracked Costs):
Employee-related expenses, including labor and benefits	$	(27.6	)
Storm restoration costs	8.8
Shared corporate costs (including computer software depreciation at Eversource Service)	22.3
Operations-related expenses, including vegetation management, vehicles, and outside services	14.6
Other non-tracked operations and maintenance	(2.9		)
Total Base Electric Distribution (Non-Tracked Costs)	15.2
Base Natural Gas Distribution (Non-Tracked Costs) - Increase due primarily to higher shared corporate costs of $10.8 million	16.6
Water Distribution	0.1
Tracked Costs (Electric Distribution, Electric Transmission and Natural Gas Distribution) - Increase due to higher transmission and vegetation management expenses, partially offset by the absence in 2019 of PSNH generation operations expenses due to the sale of its generation assets in 2018, and a decrease in employee-related benefit costs	29.2
Other and eliminations:
Eversource Parent and Other Companies - other operations and maintenance	59.8
Eliminations	(93.0		)
Total Operations and Maintenance	$	27.9

Depreciation expense increased in 2019, as compared to 2018, due primarily to higher utility plant in service balances and new depreciation rates effective with the CL&P distribution rate case settlement agreement.

Amortization expense includes the deferral of energy supply and energy-related costs included in certain regulatory commission-approved cost tracking mechanisms, and the amortization of certain costs. This deferral adjusts expense to match the corresponding revenues. Energy supply and energy-related costs are recovered from customers in rates and have no impact on earnings. Amortization decreased in 2019, as compared to 2018, due primarily to the deferral of energy supply and energy-related costs at CL&P and PSNH, partially offset by an increase in storm cost recovery at CL&P, NSTAR Electric and PSNH, and by increased amortization of PSNH's securitized regulatory asset related to the May 2018 RRB issuance of $15.7 million.

Energy Efficiency Programs expense increased in 2019, as compared to 2018, due primarily to an increase in spending for CL&P's and PSNH's energy efficiency programs. 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. CL&P, NSTAR Electric and PSNH energy efficiency programs will include additional authorized spending totaling approximately $60 million in 2020, as compared to 2019.

Taxes Other Than Income Taxes expense decreased in 2019, as compared to 2018, due primarily to a decrease of $25.4 million related to CL&P's remittance of energy efficiency funds to the State of Connecticut. Energy efficiency funds collected from CL&P's customers after July 1, 2019 are no longer subject to remittance to the State of Connecticut. The decrease is also due to amounts received by PSNH in the third quarter of 2019 relating to a refund of property taxes as a result of a settlement with the town of Bow, New Hampshire ($8.3 million).

Impairment of Northern Pass Transmission reflects an impairment charge of $239.6 million that was recorded in the second quarter of 2019 as a result of the July 19, 2019 New Hampshire Supreme Court decision. The after-tax impact of this impairment charge was $204.4 million.

Interest Expense increased in 2019, as compared to 2018, due primarily to an increase in interest on long-term debt as a result of new debt issuances ($38.9 million), an increase in interest due to the May 2018 PSNH RRB issuance ($6.7 million) and an increase in interest on notes payable ($4.1 million). Partially offsetting these increases were an increase in AFUDC related to debt funds ($5.9 million) and higher other capitalized interest ($17.0 million).

Other Income, Net increased in 2019, as compared to 2018, due primarily to an increase in equity in earnings of unconsolidated affiliates related to Eversource's equity method investments, net of impairment ($38.4 million) and investment income in 2019 compared to investment losses in 2018 ($4.8 million). In 2018, Eversource recognized a $32.9 million other-than-temporary impairment charge to our equity method investment in the Access Northeast project, which was reflected as a loss within equity in earnings. Partially offsetting these increases were a decrease related to pension, SERP and PBOP non-service income components ($29.5 million), lower gains on sales of property ($4.8 million), and a decrease in the recognition of the equity component of the carrying charges related to storm costs recorded in interest income at PSNH ($2.4 million).

Income Tax Expense decreased in 2019, as compared to 2018, due primarily to amortization of EDIT ($32.4 million), by the impairment of NPT in 2019, compared to the write-off of Access Northeast in 2018 ($37.8 million), partially offset by higher pre-tax earnings ($15.0 million), by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($8.4 million), an increase in valuation allowance against state tax credits ($13.3 million), and due to the offset of one-time items relating to federal tax reform and release of tax reserve in 2018 ($18.0 million) that did not occur in 2019. The impact of the amortization of the EDIT regulatory liability, including the tax gross up portion, that reduced revenue was $51.5 million, offset by current tax benefits of $14.1 million and amortization of EDIT of $37.4 million, for the year ended December 31, 2019, which results in no impact on earnings.

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 years ended December 31, 2019 and 2018 included in this Annual Report on Form 10-K:

	For the Years Ended December 31,
	CL&P												NSTAR Electric												PSNH
(Millions of Dollars)	2019				2018				Increase/(Decrease)				2019				2018				Increase/(Decrease)				2019				2018				Increase/(Decrease)
Operating Revenues	$	3,232.6			$	3,096.2			$	136.4			$	3,044.6			$	3,112.9			$	(68.3	)		$	1,065.9			$	1,047.6			$	18.3
Operating Expenses:
Purchased Power, Fuel and Transmission	1,188.2				1,095.2				93.0				1,064.3				1,257.1				(192.8		)		398.4				370.2				28.2
Operations and Maintenance	549.2				506.4				42.8				468.4				462.1				6.3				211.0				210.5				0.5
Depreciation	301.2				278.6				22.6				296.5				276.4				20.1				93.7				92.1				1.6
Amortization of Regulatory Assets, Net	51.6				129.0				(77.4		)		103.7				46.7				57.0				57.7				81.0				(23.3		)
Energy Efficiency Programs	118.2				94.0				24.2				289.2				292.3				(3.1		)		26.0				20.1				5.9
Taxes Other Than Income Taxes	342.5				357.2				(14.7		)		195.6				194.2				1.4				62.6				77.3				(14.7		)
Total Operating Expenses	2,550.9				2,460.4				90.5				2,417.7				2,528.8				(111.1		)		849.4				851.2				(1.8		)
Operating Income	681.7				635.8				45.9				626.9				584.1				42.8				216.5				196.4				20.1
Interest Expense	151.4				151.7				(0.3		)		114.2				105.2				9.0				60.7				60.6				0.1
Other Income, Net	17.6				22.7				(5.1		)		44.6				53.1				(8.5		)		19.2				27.7				(8.5		)
Income Before Income Tax Expense	547.9				506.8				41.1				557.3				532.0				25.3				175.0				163.5				11.5
Income Tax Expense	137.0				129.1				7.9				125.3				148.9				(23.6		)		41.0				47.6				(6.6		)
Net Income	$	410.9			$	377.7			$	33.2			$	432.0			$	383.1			$	48.9			$	134.0			$	115.9			$	18.1

Operating Revenues

Sales Volumes: A summary of our retail electric GWh sales volumes was as follows:

	For the Years Ended December 31,
	2019			2018			Decrease			Percent
CL&P	20,719			21,467			(748	)		(3.5	)%
NSTAR Electric	23,215			23,999			(784	)		(3.3	)%
PSNH	7,685			7,915			(230	)		(2.9	)%

Fluctuations in retail electric sales volumes at PSNH impact earnings. For CL&P and NSTAR Electric, fluctuations in retail electric sales volumes do not impact earnings due to their respective regulatory commission-approved distribution revenue decoupling mechanisms.

Operating Revenues: Operating Revenues, which consist of base distribution revenues and tracked revenues further described below, increased $136.4 million at CL&P and $18.3 million at PSNH, and decreased $68.3 million at NSTAR Electric in 2019, as compared to 2018.

Base Distribution Revenues:

•	CL&P's distribution revenues increased $60.8 million due primarily to the impact of its base distribution rate increases effective May 1, 2019 and May 1, 2018, which include recovery of storm costs and certain other items that do not impact earnings.

•	NSTAR Electric's distribution revenues increased $27.3 million due primarily to the impact of its base distribution rate increase effective January 1, 2019.

•	PSNH's distribution revenues increased $19.6 million due primarily to the impact of its temporary base distribution rate increase effective July 1, 2019.

Tracked Revenues: Tracked revenues consist of certain costs that are recovered from customers in retail rates through regulatory commission-approved cost tracking mechanisms and therefore, recovery of these costs has no impact on earnings. Costs recovered through cost tracking mechanisms include, among others, energy supply procurement and other energy-related costs, and retail transmission charges, which decreased significantly due primarily to the lower federal corporate income tax rate that was reflected effective January 1, 2019. In addition, cost tracking mechanisms include energy efficiency program costs, restructuring and stranded cost recovery revenues (including securitized RRB charges), and additionally for NSTAR Electric, pension and PBOP benefits and net metering for distributed generation. Tracked revenues also include wholesale market sales transactions, such as sales of energy and energy-related products into the ISO-NE wholesale electricity market and the sale of RECs to various counterparties. However, tracked revenues do include certain incentives earned, return on rate base, and carrying charges that are billed in rates to customers, which do impact earnings.

Tracked revenues increased/(decreased) in 2019, as compared to 2018, due primarily to the following:

(Millions of Dollars)	CL&P				NSTAR Electric				PSNH
Retail Tariff Tracked Revenues:
Energy supply procurement	$	26.0			$	(29.9	)		$	3.9
Retail transmission	(10.7		)		(94.0		)		(18.6		)
Other distribution tracking mechanisms	(13.7		)		20.7				11.7
Wholesale Market Sales Revenue	56.8				(3.0		)		(19.1		)

PSNH's energy supply procurement revenues include the absence in 2019 of the recovery of generation rate base return due to the sale of its thermal and hydroelectric generation assets in 2018. Revenues from CL&P's other distribution tracking mechanisms include higher earnings from its capital tracker mechanism effective July 1, 2018 due to increased electric system improvements.

CL&P's wholesale market sales revenue increase was due primarily to a new zero-carbon power purchase agreement entered into in 2019, as required by regulation, from which the energy purchased from Millstone Nuclear Power Station is sold into the market. The decrease in retail transmission at CL&P, NSTAR Electric and PSNH reflects a decrease in the retail transmission rate billed to customers that was adjusted on January 1, 2019 to reflect the lower federal corporate income tax rate.

Transmission Revenues: Transmission revenues increased $59.9 million at CL&P, $27.5 million at NSTAR Electric and $15.3 million at PSNH in 2019, as compared to 2018, due primarily to continued investment in our transmission infrastructure and a higher recovery of tracked costs.

Eliminations: 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. The impact of eliminations decreased revenues by $27.8 million at CL&P and $13.0 million at NSTAR Electric and increased revenues by $4.5 million at PSNH in 2019, as compared to 2018.

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 rates through commission-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power, Fuel and Transmission expense increased/(decreased) in 2019, as compared to 2018, due primarily to the following:

(Millions of Dollars)	CL&P				NSTAR Electric				PSNH
Purchased Power Costs	$	132.7			$	(86.3	)		$	41.7
Transmission Costs	(12.5		)		(93.9		)		(18.0		)
Eliminations	(27.2		)		(12.6		)		4.5
Total Purchased Power, Fuel and Transmission	$	93.0			$	(192.8	)		$	28.2

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 and the cost of energy purchase contracts, as required by regulation.

•	The increase at CL&P was due primarily to a new zero-carbon power purchase agreement entered into in 2019, as required by regulation, from which the energy purchased from Millstone Nuclear Power Station is sold into the market.

•	The decrease at NSTAR Electric was due primarily to a decrease in the volume of power procured on behalf of our customers.

•	The increase at PSNH was due primarily to higher purchased power energy expenses that are recovered as a component of the Energy Service and Stranded Cost Recovery Charge tracking mechanisms. 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 has purchased power in place of its self-generation output.

Transmission Costs: Included in transmission costs are charges that recover the cost of transporting electricity over high-voltage lines from generation facilities to substations, including costs allocated by ISO-NE to maintain the wholesale electric market.

•

The decrease in transmission costs at CL&P was primarily the result of a decrease in costs billed by ISO-NE that support regional grid investment. This was partially offset by an increase in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers and an increase in Local Network Service charges, which reflect the cost of transmission service provided by Eversource over our local transmission network.

•	The decrease in transmission costs at NSTAR Electric and PSNH was primarily the result of a decrease in costs billed by ISO-NE that support regional grid investment and a decrease in the retail transmission cost deferral. This was partially offset by an increase in Local Network Service charges.

•	The decrease in transmission costs at CL&P, NSTAR Electric and PSNH also pertains to a reduction to the retail transmission rate that was adjusted on January 1, 2019 to reflect the lower federal corporate income tax rate, resulting in a decrease in the cost of retail transmission service.

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) in 2019, as compared to 2018, 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	$	(9.1	)		$	(16.1	)		$	(2.4	)
HEEC Boston Harbor distribution cable costs	—				(6.5		)		—
Storm restoration costs	(1.9		)		10.7				—
Shared corporate costs (including computer software depreciation at Eversource Service)	9.2				10.7				2.4
Operations-related expenses, including vegetation management, vehicles, and outside services	3.6				2.8				8.2
Other non-tracked operations and maintenance	7.3				(4.2		)		0.5
Total Base Electric Distribution (Non-Tracked Costs)	9.1				(2.6		)		8.7
Tracked Costs:
Absence in 2019 of PSNH generation operations expenses due to the 2018 sales of thermal and hydroelectric generation assets	—				—				(10.9		)
Transmission expenses	23.5				2.5				(1.8		)
Other tracked operations and maintenance	10.2				6.4				4.5
Total Tracked Costs	33.7				8.9				(8.2		)
Total Operations and Maintenance	$	42.8			$	6.3			$	0.5

Depreciation increased in 2019, as compared to 2018, due primarily to the following:

•	The increase at CL&P was due to higher net plant in service balances and the implementation of new depreciation rates effective with the 2018 CL&P distribution rate case settlement agreement.

•	The increase at NSTAR Electric was due to higher net plant in service balances.

•	The increase at PSNH was due to higher distribution depreciation expense, partially offset by 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-approved cost tracking mechanisms, and the amortization of certain costs. This deferral adjusts expense to match the corresponding revenues. Energy supply and energy-related costs are recovered from customers in rates and have no impact on earnings.

•

The increase at NSTAR Electric in 2019, as compared to 2018, was due primarily to an increase in both storm cost recovery and costs associated with low income customers. The remaining increase in amortization was driven by the deferral 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.

•	The decrease at CL&P and PSNH was due primarily to the deferral of energy supply and energy-related costs, partially offset by an increase in storm cost recovery. The decrease at PSNH is also partially offset by $15.7 million of higher amortization of PSNH's securitized regulatory asset related to the May 2018 RRB issuance.

Energy Efficiency Programs expense includes costs of various state energy policy initiatives and expanded energy efficiency programs that are recovered from customers in rates, most of which have no impact on earnings. Energy Efficiency Programs expense increased/(decreased) in 2019, as compared to 2018, due primarily to the following:

•	The increase at CL&P and PSNH was due to higher spending for energy efficiency programs.

•	The decrease at NSTAR Electric was due to the timing of spending on certain large energy efficiency projects in 2019.

CL&P, NSTAR Electric and PSNH energy efficiency programs will include additional authorized spending of approximately $5 million, $40 million, and $15 million, respectively, in 2020 as compared to 2019.

Taxes Other Than Income Taxes decreased in 2019, as compared to 2018, due primarily to the following:

•

The decrease at CL&P was due to a decrease of $25.4 million related to CL&P's remittance of energy efficiency funds to the State of Connecticut. Energy efficiency funds collected from customers after July 1, 2019 are no longer subject to remittance to the State of Connecticut. The decrease was partially offset by higher property taxes as a result of higher utility plant balances and higher gross earnings taxes (the costs of which are tracked).

•	The decrease at PSNH was due to lower property taxes and a refund of property taxes as a result of a settlement with the town of Bow, New Hampshire ($8.3 million).

Interest Expense increased/(decreased) in 2019, as compared to 2018, due primarily to the following:

•	The decrease at CL&P was due to lower interest on long-term debt ($2.6 million), an increase in AFUDC related to debt funds ($0.8 million), and lower amortization of debt discounts and premiums, net ($0.8 million), partially offset by an increase in interest expense on regulatory deferrals ($2.2 million) and an increase in interest on notes payable ($1.4 million).

•	The increase at NSTAR Electric was due to higher interest on long-term debt ($8.1 million).

•	Interest expense at PSNH did not significantly change as the increase in interest due to the May 2018 RRB issuance ($6.7 million) was offset by a decrease in interest expense on regulatory deferrals ($3.1 million), a decrease in interest on notes payable ($2.0 million) and an increase in AFUDC related to debt funds ($1.5 million).

Other Income, Net decreased in 2019, as compared to 2018, due primarily to the following:

•	The decrease at CL&P was due to a decrease related to pension, SERP and PBOP non-service income components ($9.0 million), partially offset by investment income in 2019 compared to investment losses in 2018 ($5.3 million).

•	The decrease at NSTAR Electric was due to a decrease related to pension, SERP and PBOP non-service income components ($12.5 million) and an increase in investment losses in 2019 compared to 2018 ($2.7 million), partially offset by an increase in AFUDC related to equity funds ($4.2 million) and an increase in amounts related to officers' life insurance policies ($2.8 million).

•

The decrease at PSNH was due to a decrease related to pension, SERP and PBOP non-service income components ($5.0 million), the absence in 2019 of a gain on the sale of property ($4.4 million) and a decrease in the recognition of the equity component of the carrying charges related to storm costs recorded in interest income ($2.4 million). Partially offsetting these decreases was an increase in AFUDC related to equity funds ($3.4 million).

Income Tax Expense increased/(decreased) in 2019, as compared to 2018, due primarily to the following:

•

The increase at CL&P was due to higher pre-tax earnings ($8.6 million) and an increase in a valuation allowance against state tax credits ($9.8 million). These increases were partially offset by amortization of EDIT ($5.8 million), return to provision ($3.0 million), lower state taxes ($1.3 million), and by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($0.4 million). The impact of the amortization of the EDIT regulatory liability, including the tax gross up portion, that reduced revenue was $7.9 million, offset by a current tax benefit of $2.1 million and amortization of EDIT of $5.8 million for the year ended December 31, 2019, which results in no impact on earnings.

•

The decrease at NSTAR Electric was due to amortization of EDIT ($22.9 million), return to provision ($1.3 million), items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($6.3 million) and partially offset by higher pre-tax earnings ($5.4 million) and higher state taxes ($1.5 million). The impact of the amortization of the EDIT regulatory liability, including the tax gross up portion, that reduced revenue was $31.5 million, offset by a current tax benefit of $8.6 million and amortization of EDIT of $22.9 million for the year ended December 31, 2019, which results in no impact on earnings.

•

The decrease at PSNH was due to lower state taxes ($4.4 million), return to provision ($1.1 million), and items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($3.8 million). These decreases were partially offset by higher pre-tax earnings ($2.7 million). The impact of the amortization of the EDIT regulatory liability, including the tax gross up portion, that reduced revenue was $5.6 million, offset by a current tax benefit of $1.6 million and amortization of EDIT of $4.0 million for the year ended December 31, 2019, which results in no impact on earnings.

EARNINGS SUMMARY

CL&P's earnings increased $33.2 million in 2019, as compared to 2018, due primarily to base distribution rate increases effective May 1, 2019 and May 1, 2018, an increase in transmission earnings driven by a higher transmission rate base, and, effective July 1, 2018, higher earnings from its capital tracker mechanism due to increased electric system improvements. The earnings increase was partially offset by higher operations and maintenance expense, higher depreciation expense, lower non-service income from our benefit plans, and higher property tax expense.

NSTAR Electric's earnings increased $48.9 million in 2019, as compared to 2018, due primarily to the base distribution rate increase effective January 1, 2019, an increase in transmission earnings driven by a higher transmission rate base, and higher earnings from its solar generation capital tracker mechanism. The earnings increase was partially offset by higher depreciation expense and higher interest expense.

PSNH's earnings increased $18.1 million in 2019, as compared to 2018, due primarily to the temporary base distribution rate increase effective July 1, 2019 and an increase in transmission earnings driven by a higher transmission rate base. The earnings increase was partially offset by the absence in 2019 of generation earnings as a result of the sale of its generation assets in 2018, higher operations and maintenance expense, the absence in 2019 of a gain on the sale of property in 2018, and lower non-service income from our benefit plans.

LIQUIDITY

Cash Flows: CL&P had cash flows provided by operating activities of $726.4 million in 2019, as compared to $588.1 million in 2018. The increase in operating cash flows was due primarily to the timing of cash payments made on our accounts payable and collections on our accounts receivable, a decrease in 2019 of approximately $98 million of storm restoration cost payments, an increase related to the timing of cash collected for regulatory tracking mechanisms, and a decrease in 2019 of $17.2 million of pension contributions. Partially offsetting these favorable impacts were higher income tax payments made in 2019 of $14.5 million, and the timing of other working capital items.

NSTAR Electric had cash flows provided by operating activities of $698.3 million in 2019, as compared to $780.5 million in 2018. The decrease in operating cash flows was due primarily to the timing of collections for regulatory tracking mechanisms, which were significantly impacted by the timing of collections of purchased power and transmission costs, and the timing of cash payments made on our accounts payable and other working capital items. Partially offsetting these unfavorable impacts were a decrease in 2019 of approximately $45 million of storm restoration cost payments, the timing of cash collections on our accounts receivable, a decrease in 2019 of $55.4 million of pension and PBOP cash contributions, and lower income tax payments made in 2019 of $42.1 million.

PSNH had cash flows provided by operating activities of $274.4 million in 2019, as compared to $259.9 million in 2018. The increase in operating cash flows was due primarily to the timing of collections on our accounts receivable and cash payments made on our accounts payable, and lower income tax payments made in 2019 of $23.9 million. Partially offsetting these favorable impacts were $15.4 million of pension contributions made in 2019 and the timing of other 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.