Company: CNLHP
Filing Date: 2025-02-14
Form Type: 10-K
Source: 0000072741-25-000007
Chunk: 285

Company: CONNECTICUT LIGHT & POWER CO
Filing Date: 2025-02-14
Form: 10-K
Item: Item 8
Chunk 285
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 and on whether or not the contract is a derivative.  The application of derivative accounting is complex and requires management judgment in the following respects: identification of derivatives and embedded derivatives, election and designation of a contract as normal, and determination of the fair value of derivative contracts.  All of these judgments can have a significant impact on the financial statements.  The judgment applied in the election of a contract as normal (and resulting accrual accounting) includes the conclusion that it is probable at the inception of the contract and throughout its term that it will result in physical delivery of the underlying product and that the quantities will be used or sold by the business in the normal course of business.  If facts and circumstances change and management can no longer support this conclusion, then a contract cannot be considered normal, accrual accounting is terminated, and fair value accounting is applied prospectively.  The fair value of derivative contracts is based upon the contract terms and conditions and the underlying market price or fair value per unit.  When quantities are not specified in the contract, the Company determines whether the contract has a determinable quantity by using amounts referenced in default provisions and other relevant sections of the contract.  The fair value of derivative assets and liabilities with the same counterparty are offset and recorded as a net derivative asset or liability on the balance sheets.  Regulatory assets or regulatory liabilities are recorded to offset the fair values of these derivative contracts related to energy and energy-related products, as contract settlements are recovered from, or refunded to, customers in future rates.  All changes in the fair value of these derivative contracts are recorded as regulatory assets or liabilities and do not impact net income.For further information regarding derivative contracts, see Note 4, "Derivative Instruments," to the financial statements.J.     Operating ExpensesThe cost of natural gas included in Purchased Power, Purchased Natural Gas and Transmission on the statements of income was as follows: For the Years Ended December 31,(Millions of Dollars)202420232022Eversource - Cost of Natural Gas$689.6 $792.2 $1,010.2 

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K.     Allowance for Funds Used During Construction

AFUDC represents the cost of borrowed and equity funds used to finance construction and is included in the cost of the electric, natural gas and water companies' utility plant on the balance sheet.  The portion of AFUDC attributable to borrowed funds is recorded as a reduction of Interest Expense, and