Company: CNLHP
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001628280-25-050033
Chunk: 94

Company: CONNECTICUT LIGHT & POWER CO
Filing Date: 2025-11-06
Form: 10-Q
Item: Item 8
Chunk 94
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 Price Risk Management:  As required by regulation, CL&P, along with UI, has capacity-related contracts with generation facilities.  CL&P has a sharing agreement with UI, with 80 percent of the costs or benefits of each contract borne by or allocated to CL&P and 20 percent borne by or allocated to UI.  The combined capacities of these contracts as of September 30, 2025 and December 31, 2024 were 609 MW and 610 MW, respectively.  The capacity contracts extend through 2026 and obligate both CL&P and UI to make or receive payments on a monthly basis to or from the generation facilities based on the difference between a set capacity price and the capacity market price received in the ISO-NE capacity markets. For the three months ended September 30, 2025 and 2024, there were losses of $0.1 million and $0.5 million, respectively.  For the nine months ended September 30, 2025 and 2024, there were losses of $0.7 million and $3.4 million, respectively.  These changes in fair value associated with CL&P’s derivative contracts are deferred in Regulatory Assets on the balance sheet.In accordance with Massachusetts legislation, in June 2018, NSTAR Electric entered into a 20-year power purchase agreement for the purchase of clean energy and renewable energy attributes with estimated total payments of $6.7 billion made over the 20-year term.  The agreement is expected to be marked to market on the balance sheet as a material derivative liability by the end of 2025.  The derivative liability is projected to be approximately $350 million, subject to fluctuations based on prevailing market conditions at the time of recognition.  This derivative liability will be fully offset by a regulatory asset for recovery from NSTAR Electric’s customers.Fair Value Measurements of Derivative InstrumentsThe fair value of derivative contracts utilizes both observable and unobservable inputs.  The fair value is modeled using income techniques, such as discounted cash flow valuations adjusted for assumptions related to exit price.  Valuations of derivative contracts using a discounted cash flow methodology include assumptions regarding the timing and likelihood of scheduled capacity payments and also reflect non-performance risk, including credit, using the default probability approach based on the counterparty's credit rating for assets and the Company's credit rating for liabilities.  Significant observable inputs for valuations of these contracts include energy-related product prices in future years for