Pre-tax benefit to earnings from settlement agreement

  
Income Taxes, Net:  The tax effect of temporary book-tax differences (differences between the periods in which transactions affect income in the financial statements and the periods in which they affect the determination of taxable income, including those differences relating to uncertain tax positions) is accounted for in accordance with the rate-making treatment of the applicable regulatory commissions and accounting guidance for income taxes.  Differences in income taxes between the accounting guidance and the rate-making treatment of the applicable regulatory commissions are recorded as regulatory assets.  As these assets are offset by deferred income tax liabilities, no carrying charge is collected.  The amortization period of these assets varies depending on the nature and/or remaining life of the underlying assets and liabilities.  For further information regarding income taxes, see Note 12, "Income Taxes," to the financial statements.     
Securitized Stranded Costs: In 2018, a subsidiary of PSNH issued $635.7 million of securitized RRBs to finance PSNH's unrecovered remaining costs associated with the divestiture of its generation assets. Securitized regulatory assets, which are not earning an equity return, are being recovered over the amortization period of the associated RRBs. The PSNH RRBs are expected to be repaid by February 1, 2033. For further information, see Note 10, "Rate Reduction Bonds and Variable Interest Entities."  
Storm Costs, Net: The storm cost deferrals relate to costs incurred for storm events at CL&P, NSTAR Electric and PSNH that each company expects to recover from customers.  A storm must meet certain criteria to qualify for deferral and recovery with the criteria specific to each state jurisdiction and utility company. Once a storm qualifies for recovery, all qualifying expenses incurred during storm restoration efforts are deferred and recovered from customers. Costs for storms that do not meet the specific criteria are expensed as incurred. In addition to storm restoration costs, CL&P and PSNH are each allowed to recover pre-staging storm costs. Management believes all storm costs deferred were prudently incurred and meet the criteria for specific cost recovery in Connecticut, Massachusetts and New Hampshire, and that recovery from customers is probable through the applicable regulatory recovery processes. Each electric utility company either recovers a carrying charge on its deferred storm cost regulatory asset balance or the regulatory asset balance is included in rate base.   
In 2021 and 2020, multiple tropical and severe storms caused extensive damage to CL&P’s electric distribution systems and customer outages, along with significant pre-staging costs. These storms resulted in deferred pre-staging and storm restoration costs at CL&P of $232 million for 2021 storms and $344 million for 2020 storms, including the catastrophic impact of Tropical Storm Isaias in August 2020, among others. Management believes that all of these storm costs were prudently incurred and meet the criteria for specific cost recovery. As part of CL&P’s October 1, 2021 settlement agreement described below, it agreed to freeze its current base distribution rates (including storm costs) until no earlier than January 1, 2024.   
Of Eversource’s total deferred storm costs, $1.01 billion either has yet to be filed with the applicable regulatory commission or is pending regulatory approval (including $643 million at CL&P, $308 million at NSTAR Electric and $61 million at PSNH) as of December 31, 2021.  
CL&P Tropical Storm Isaias Costs:  On August 4, 2020, Tropical Storm Isaias caused catastrophic damage to our electric distribution system, which resulted in significant numbers and durations of customer outages, primarily in Connecticut. In terms of customer outages, this storm was one of the worst in CL&P’s history. PURA will investigate the prudency of costs incurred by CL&P to restore service in response to Tropical Storm Isaias. That investigation is expected to occur either in a separate proceeding not yet initiated or as part of CL&P’s next rate review proceeding. Tropical Storm Isaias resulted in deferred storm restoration costs of approximately $234 million at CL&P and $251 million at Eversource as of December 31, 2021. Although PURA found that CL&P’s performance in its preparation for and response to Tropical Storm Isaias fell below applicable performance standards in certain instances, CL&P believes it will be able to present credible evidence in a future proceeding demonstrating there is no reasonably close causal connection between the alleged sub-standard performance and the storm costs incurred. While it is possible that some amount of storm costs may be disallowed by the PURA in a future proceeding, any such amount cannot be estimated at this time. Eversource and CL&P continue to believe that these storm restoration costs associated with Tropical Storm Isaias were prudently incurred and meet the criteria for cost recovery; and as a result, management does not expect the storm cost review by the PURA to have a material impact on the financial position or results of operations of Eversource or CL&P.   
NSTAR Electric Storm Threshold Filing: On December 22, 2021, the DPU approved NSTAR Electric to defer for future recovery the storm cost threshold amounts associated with six qualifying major storm events that occurred during 2020, totaling $7.2 million. The DPU approved the deferral of threshold costs that exceeded four storms (those recovered in base rates plus one additional storm) until the next rate case proceeding, at which time the DPU will determine the appropriate level of recovery of storm threshold amounts. In its January 14, 2022 distribution rate case filing, NSTAR Electric is also seeking recovery of the deferral of threshold costs for an additional seven storms in 2021. The pre-tax benefit to earnings for the deferral as a regulatory asset of threshold costs for both the 2020 and 2021 major storms was $15.6 million and was recorded in the fourth quarter of 2021.   
Regulatory Tracker Mechanisms:  The regulated companies' approved rates are designed to recover costs incurred to provide service to customers. The regulated companies recover certain of their costs on a fully-reconciling basis through regulatory commission-approved tracking mechanisms. The differences between the costs incurred (or the rate recovery allowed) and the actual revenues are recorded as regulatory assets (for undercollections) or as regulatory liabilities (for overcollections) to be included in future customer rates each year.  Carrying charges are recovered in rates on all material regulatory tracker mechanisms.  
The electric and natural gas distribution companies recover, on a fully reconciling basis, the costs associated with the procurement of energy supply, electric transmission related costs from FERC-approved transmission tariffs, energy efficiency programs, low income assistance programs, certain uncollectible accounts receivable for hardship customers, restructuring and stranded costs as a result of deregulation (including securitized RRB charges), certain capital tracking mechanisms for infrastructure improvements, and additionally for the Massachusetts utilities, pension and PBOP benefits, net metering for distributed generation, and solar-related programs.   
96
