Company: CNLHP
Filing Date: 2025-02-14
Form Type: 10-K
Source: 0000072741-25-000007
Chunk: 207

Company: CONNECTICUT LIGHT & POWER CO
Filing Date: 2025-02-14
Form: 10-K
Item: Item 7
Chunk 207
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 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.  

We believe that the operations of each of our regulated companies currently satisfy the criteria for application of regulatory accounting.  If events or circumstances should change in a future period so that those criteria are no longer satisfied, we would be required to eliminate any associated regulatory assets and liabilities and the impact would be recognized in the statement of income and may result in a material adverse effect on results of operations and financial condition.

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 make judgments regarding the future outcome of regulatory proceedings that involve potential future refund to customers and record liabilities for these loss contingencies when probable and reasonably estimable based upon available information.  Regulatory liabilities are recorded at the best estimate, or at a low end of the range of possible loss.  The amount recorded may differ from when the uncertainty is resolved.  Such differences could have a significant impact on our financial statements.

We