UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549

                            FORM 10-Q

<TABLE>
<CAPTION>
<S>   <C>
[x]   Quarterly report pursuant to Section 13 or 15(d) of the
      Securities Exchange Act of 1934

      For the quarterly period ended June 30, 2002


                               or

[ ]  Transition report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934

      For the transition period from            to
</TABLE>

                 Commission file number 1-14768
<TABLE>
<CAPTION>
<S>                                    <C>
                           NSTAR
     (Exact name of registrant as specified in its charter)


              Massachusetts                     04-3466300
     (State or other jurisdiction of         (I.R.S. Employer
     incorporation or organization)        Identification No.)


800 Boylston Street, Boston, Massachusetts         02199
 (Address of principal executive offices)        (Zip Code)



Registrant's telephone number, including area code: (617)424-2000
</TABLE>

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was
required to file such reports), and (2) has been
subject tosuch filing requirements for the past
90 days. Yes   x     No



Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
<S>                              <C>
           Class                   Outstanding at August 12, 2002
Common Shares, $1 par value              53,032,546 shares
</TABLE>
Part I - Financial Information
Item 1.  Financial Statements

<TABLE>
<CAPTION>
                              NSTAR
           Condensed Consolidated Statements of Income
                           (Unaudited)
        (in thousands, except earnings (loss) per share)
<S>                                  <C>        <C>          <C>       <C>
                                        Three Months Ended      Six Months Ended
                                              June 30,                June 30,
                                          2002        2001        2002        2001
Operating revenues                    $600,446    $732,273  $1,323,311  $1,597,095
Operating expenses:
  Purchased power and cost of gas sold 307,140     434,374     720,471     965,135
  Operations and maintenance           108,636      95,030     214,889     203,326
  Depreciation and amortization         56,883      55,047     117,508     114,120
  Demand side management and
    renewable energy programs           15,447      18,700      31,872      38,332
  Property and other taxes              24,152      22,464      51,201      49,576
  Income taxes                          19,127      24,981      41,594      55,661
    Total operating expenses           531,385     650,596   1,177,535   1,426,150

Operating income                        69,061      81,677     145,776     170,945

Other income (deductions):
  Write-down of RCNinvestment, net     (27,601)          -     (27,601)   (173,944)
  Other income, net                      5,898       2,460       7,422         879
                                       (21,703)      2,460     (20,179)   (173,065)
Operating and other income              47,358      84,137     125,597      (2,120)
Interest charges:
  Long term debt                        28,016      29,603      56,038      59,224
  Transition property
    securitization certificates          9,325      10,431      19,130      21,229
  Short-term and other                   4,488       8,592      10,385      15,987
  Allowance for borrowed
funds used  during construction           (161)     (2,199)       (440)     (4,014)
      Total interest charges            41,668      46,427      85,113      92,426
Net income (loss)                        5,690      37,710      40,484     (94,546)
Preferred stock dividends of subsidiary    490       1,490         980       2,980
Earnings (loss) available for
common shareholders                   $  5,200    $ 36,220  $   39,504  $  (97,526)
                                      ========    ========   =========  =========

Weighted average common shares outstanding:
    Basic                               53,033      53,033      53,033      53,033
                                        ======      ======      ======      ======
    Diluted                             53,331      53,214      53,294      53,178
                                        ======      ======      ======      ======
Earnings (loss) per common share:
    Basic                                $0.10       $0.68       $0.75      $(1.84)
                                         =====       =====       =====       ======
    Diluted                              $0.10       $0.68       $0.74      $(1.84)
                                         =====       =====        =====      ======
Dividends declared per common share      $0.53      $0.515       $1.06       $1.03
                                         =====       =====       =====       ======

The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>

<TABLE>
<CAPTION>
                              NSTAR
Condensed Consolidated Statements of Comprehensive Income (Loss)
                           (Unaudited)
                         (in thousands)

<S>                             <C>       <C>         <C>      <C>
                                   Three Months Ended   Six Months Ended
                                       June 30,              June 30,
                                    2002       2001       2002       2001

Net income (loss)                $ 5,690    $37,710    $40,484   $(94,546)
Other comprehensive income, net:
  Unrealized gain (loss) on
    investments                    4,506      8,353       (893)    41,493
Comprehensive income (loss)      $10,196    $46,063    $39,591   $(53,053)
                                 =======    =======    =======   ========

The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>

                              NSTAR
     Condensed Consolidated Statements of Retained Earnings
                           (Unaudited)
                         (in thousands)
<S>                                <C>          <C>         <C>       <C>

                                       Three Months Ended      Six Months Ended
                                            June 30,               June 30,
                                        2002         2001       2002        2001

Balance at the beginning
of  the period                      $340,335     $285,970   $334,138    $447,087

Add (Deduct):
  Net income (loss)                    5,690       37,710     40,484     (94,546)
    Subtotal                         346,025      323,680    374,622     352,541
Deduct:
Dividends declared:
  Common shares                       28,109       27,312     56,216      54,623
  Preferred stock                        490        1,490        980       2,980
    Subtotal                          28,599       28,802    57,196       57,603
Provision for preferred stock
  redemption and issuance costs            -           60          -         120
Balance at the end of the period    $317,426     $294,818   $317,426    $294,818
                                    ========     ========   ========    ========




The accompanying notes are an integral part of the condensed consolidated financial
statements.
</TABLE>

<TABLE>
<CAPTION>
                              NSTAR
              Condensed Consolidated Balance Sheets
                           (Unaudited)
                         (in thousands)

 <S>                                       <C>            <C>
                                                June 30,    December 31,
                                                   2002            2001

Assets
Utility plant in service, at original cost  $ 3,986,096     $ 3,853,295
  Less: accumulated depreciation              1,335,968       1,300,868
                                              2,650,128       2,552,427
Construction work in progress                    75,396          72,957
  Net utility plant                           2,725,524       2,625,384

Non-utility property, net                       110,775         106,007

Goodwill                                        457,500         463,626
Equity investments                               21,387          22,560
Other investments                                49,068          73,104

Current assets:
  Cash and cash equivalents                         601          11,655
  Restricted cash                                23,116          22,966
  Accounts receivable, net                      293,332         485,687
  Accrued unbilled revenues                      47,456          51,061
  Fuel, materials and supplies, at average cost  53,888          53,276
  Other                                          20,703          33,599
    Total current assets                        439,096         658,244

Deferred debits:
  Regulatory assets - other                     963,249       1,026,241
  Power contracts                               656,282               -
  Prepaid pension cost                          238,114         218,713
  Other                                         121,904         134,312

  Total assets                              $ 5,782,899     $ 5,328,191
                                            ===========     ===========






The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>

<TABLE>
<CAPTION>
                              NSTAR
              Condensed Consolidated Balance Sheets
                           (Unaudited)
                         (in thousands)

<S>                                           <C>            <C>
                                                   June 30,      December 31,
                                                       2002              2001
Capitalization and Liabilities
Common equity:
  Common shares, par value $1 per share
    (53,032,546 shares issued and outstanding)  $    53,033       $    53,033
  Premium on common shares                          870,386           873,664
  Retained earnings                                 317,426           334,138
    Total common equity                           1,240,845         1,260,835

Accumulated other comprehensive income                  868             1,761

Cumulative non-mandatory redeemable
  preferred stock of subsidiary                      43,000            43,000

Long-term debt                                    1,210,604         1,377,899
Transition property securitization
  certificates                                      479,500           513,904
    Total long-term debt                          1,690,104         1,891,803

    Total capitalization                          2,974,817         3,197,399

Current liabilities:
  Long-term debt                                    171,422            37,676
  Transition property securitization
     certificates                                    42,565            40,972
  Notes payable                                     543,900           624,847
  Accounts payable                                  174,115           209,821
  Deferred taxes                                     54,462            41,985
  Accrued interest                                   32,214            29,224
  Dividends payable                                  28,434            28,434
  Other                                             250,883           250,540
    Total current liabilities                     1,297,995         1,263,499

Deferred credits:
  Accumulated deferred income taxes                 620,308           616,743
  Accumulated deferred investment tax credits        36,888            37,877
  Power contracts                                   704,628            53,041
  Other                                             148,263           159,632
                                                  1,510,087           867,293

Commitments and contingencies

    Total capitalization and liabilities        $ 5,782,899       $ 5,328,191
                                                ===========       ===========


The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>

<TABLE>
<CAPTION>
                              NSTAR
         Condensed Consolidated Statements of Cash Flows
                           (Unaudited)
                         (in thousands)
<S>                                          <C>          <C>
                                             Six Months Ended June 30,
                                                    2002         2001

Operating activities:
  Net income (loss)                            $  40,484    $  (94,546)
  Adjustments to reconcile net income to net
    cash provided by operating activities:
    Depreciation and amortization                117,508       114,120
    Deferred income taxes and investment
      tax credits                                 17,254       (29,337)
    Loss on write-down of RCN investment          27,601       168,376
    Allowance for borrowed funds used
     during construction                            (440)       (4,014)
  Net changes in working capital                 188,198        (3,187)
  Other, net                                     (38,056)     (125,471)
Net cash provided by operating activities        352,549        25,941

Investing activities:
  Plant expenditures (excluding AFUDC)          (168,072)       (94,872)
  Other investments                                8,973            915
Net cash used in investing activities           (159,099)       (93,957)

Financing activities:
  Long-term debt redemptions                     (33,550)        (1,250)
  Transition property securitization
    certificates redemptions                     (32,811)       (30,702)
  Net change in notes payable                    (80,947)       143,450
  Dividends paid                                 (57,196)       (57,604)
Net cash (used in) provided by financing
  activities                                    (204,504)        53,894

Net decrease in cash and cash equivalents        (11,054)       (14,122)
Cash and cash equivalents at beginning of year    11,655         21,873
Cash and cash equivalents at end of period     $     601      $   7,751
                                               =========      =========

Supplemental disclosures of cash flow
  information:

Cash paid during the period for:
  Interest, net of amounts capitalized         $  76,449      $  88,647
                                               =========      =========
  Income taxes                                 $  19,453      $ 133,994
                                               =========      =========
Supplemental disclosure of investing activity:                $   4,537
Investment in common shares                                   =========

The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>

 Notes to Unaudited Condensed Consolidated Financial Statements

The accompanying Notes should be read in conjunction with Notes
to the Consolidated Financial Statements incorporated in NSTAR's
2001 Annual Report on Form 10-K.

A)  About NSTAR

NSTAR is an energy delivery company serving approximately 1.3
million customers in Massachusetts, including approximately 1.1
million electric customers in 81 communities and 246,000 gas
customers in 51 communities.  NSTAR is an exempt public utility
holding company.  NSTAR's retail utility subsidiaries are Boston
Edison Company (Boston Edison), Commonwealth Electric Company
(ComElectric), Cambridge Electric Light Company (Cambridge
Electric) and NSTAR Gas Company (NSTAR Gas).  Its wholesale
electric subsidiary is Canal Electric Company (Canal).  NSTAR's
three retail electric companies operate under the brand name
"NSTAR Electric."  Reference in this report to "NSTAR Electric"
shall mean each of Boston Edison, ComElectric and Cambridge
Electric.  NSTAR's non-utility operations include
telecommunications - NSTAR Communications, Inc. (NSTAR Com),
district heating and cooling operations (Advanced Energy Systems,
Inc. and NSTAR Steam Corporation) and a liquefied natural gas
service company (Hopkinton LNG Corp.).

B)  Basis of Presentation

The financial information presented as of June 30, 2002 and for
the periods ended June 30, 2002 and 2001 have been prepared from
NSTAR's books and records without audit by independent
accountants.  Financial information as of December 31, 2001 was
derived from the audited consolidated financial statements of
NSTAR, but does not include all disclosures required by generally
accepted accounting principles (GAAP).  In the opinion of NSTAR's
management, all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial
information for the periods indicated have been included.
Certain reclassifications have been made to the prior year data
to conform with the current presentation.

The preparation of financial statements in conformity with GAAP
requires management of NSTAR and its subsidiaries to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from these estimates.

The results of operations for the three or six months ended June
30, 2002 and 2001 are not indicative of the results that may be
expected for an entire year.  Kilowatt-hour sales and revenues
are typically higher in the winter and summer than in the spring
and fall, as sales tend to vary with weather conditions.  Gas
sales and revenues are typically higher in the winter months than
during other periods of the year.

C)  Accounting Standards

The Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS)
No. 146 "Accounting for Costs Associated with Exit or
Disposal Activities" (SFAS 146) that requires entities to record
a liability for costs related to exit or disposal activities when
the costs are incurred.  Previous accounting guidance required
the liability to be recorded at the date of commitment to an exit
or disposal plan.  NSTAR is required to comply with SFAS 146
beginning January 1, 2003.  NSTAR is in the process of assessing
the provisions of SFAS 146 in order to determine its impact on
its financial position and results of operations.

As of January 1, 2001, NSTAR adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities", as amended by
SFAS Nos. 137 and 138, (collectively, SFAS 133).  SFAS 133
established accounting and reporting standards requiring every
derivative instrument (including certain derivative instruments
embedded in such contracts as fixed-price fuel supply and power
contracts) be recorded on the Consolidated Balance Sheets as
either an asset or liability measured at its fair value.
Previously, all of NSTAR's commodity purchased power contracts
were exempt from this accounting treatment under the normal
purchase and sales exception of SFAS 133.  As a result, these
contracts were not marked to market and has not been reflected on
the Consolidated Balance Sheets.

Refer to Note F "Derivative Instruments" for further discussion.

D)  Amortization of Merger Related Costs

The merger creating NSTAR was accounted for using the purchase
method of accounting.  The premium (Goodwill) associated with
this acquisition amounted to approximately $490 million, while
the original estimate of transaction and integration costs to
achieve the merger was $111 million.  The merger premium is
reflected on the accompanying Condensed Consolidated Balance
Sheets as Goodwill.  This premium will continue to be amortized
over 40 years and amounts to approximately $12.2 million
annually, while the costs to achieve (CTA) are being amortized
over 10 years.  CTA are the costs incurred to execute the merger
including the employee costs for a voluntary severance program,
costs of financial advisers, legal costs, transaction costs and
systems integration costs.  CTA is being amortized at an annual
rate of $11.1 million based on the original rate plan.  NSTAR
expects to be required by the Massachusetts Department of
Telecommunications and Energy (MDTE) to reconcile the actual CTA
costs incurred with the original estimate.  This reconciliation
will include a final accounting of the deductibility for income
tax purposes of each component of CTA.  The total CTA is
approximately $144 million.  This increase from the original
estimate is partially mitigated by the fact that the portion of
CTA that is not deductible for income tax purposes is
approximately $20 million lower than the original estimate.

In June 2001, FASB and SFAS No.142, "Goodwill and Other Intangible
Assets" (SFAS 142).  This Statement, which was effective for
NSTAR in the first quarter of 2002, establishes accounting
and reporting standards for acquired
goodwill and other indefinite lived intangible assets.  It
prohibits entities from continuing amortization of these assets.
Instead, goodwill and other intangible assets are subject to
review for impairment.  However, in accordance with the
provisions of SFAS 142 and a revised amendment to SFAS No. 71,
"Accounting for the Effects of Certain Types of Regulation,"
NSTAR will continue amortizing this asset over its estimated
regulatory recovery period.  NSTAR has determined that its
regulatory rate structure, resulting from the merger and approved
by the MDTE, supports the continued amortization of goodwill over
the period it is collected from its customers.  A significant
element of this rate plan includes amortization of the
acquisition premium over 40 years.

E)  Investments - Available for Sale Securities

NSTAR classifies its investment in marketable securities as
available for sale.  These investments include 11.6 million
common shares of RCN Corporation and approximately 73,400 common
shares of John Hancock Financial Services, Inc. (John Hancock)
with market values of approximately $15.8 million and $2.6
million, respectively, at June 30, 2002.  During the first half
of 2002, NSTAR sold 75,000 shares of John Hancock and its
investment of approximately 141,000 shares of MetLife, Inc. for
approximately $7.2 million and recognized a gain of approximately
$3.9 million.  These shares were obtained through the
demutualization of John Hancock and MetLife.  NSTAR includes any
unrealized gains or losses on these securities in Accumulated
other comprehensive income, net on the accompanying Condensed
Consolidated Balance Sheets.

F)  Derivative Instruments

NSTAR adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133), effective January
1, 2001.  The accounting for derivative financial instruments is
subject to change based on the guidance received from the
Derivative Implementation Group (DIG) of FASB.  The DIG issued
C15, on October 10, 2001, which specifically addressed the
interpretation of clearly and closely related contracts that
qualify for the normal purchase and sales exception under SFAS
133.  The conclusion reached by the DIG was that contracts with a
pricing mechanism that is subject to future adjustment based on a
generic index that is not specifically related to the contracted
service commodity, generally would not qualify for the normal
purchase and sales exception.

On April 1, 2002, the effective date of DIG C15, NSTAR adopted
the interpretation of this guidance and began marking to market
certain of its long-term purchased power contracts that
previously qualified for the normal purchase and sale exception.
NSTAR has six purchased power contracts that contain components
with pricing mechanisms that are based on a generic index, such
as the GNP or CPI and are applied to in significant factors of
these agreements.  Therefore, as required by the interpretation
of C-15, NSTAR has recorded these contracts at fair value on its
accompanying Condensed Consolidated Balance Sheets in the second
quarter of 2002.  This action resulted in the recognition of a
liability for the fair value of the above-market portion of these
contracts as of June 30, 2002 of approximately $656 million and
is a component of Power contracts on the accompanying Condensed
Consolidated Balance Sheets.  NSTAR has recorded a corresponding
regulatory asset to reflect the future recovery of the above-
market component of these contracts through its transition
charge.  Therefore, as a result of this regulatory treatment, the
recording of these contracts on its accompanying Condensed
Consolidated Balance Sheets does not result in an earnings
impact.

NSTAR has other purchased power contracts in which the fair value
is significantly above-market.  However, these contracts have met
the criteria for normal purchase and sales exception and have not
been recorded on the accompanying Condensed Consolidated Balance
Sheets.  The above market portion of these contracts is currently
being recovered through the transition charge.

NSTAR will continue to monitor any further guidance that may
result from FASB revisions and clarifications to SFAS 133.  Based
on NSTAR's assessment to date, the adoption of SFAS 133 has not
had a material effect on its results of operations, cash flows,
or financial position.

G)  RCN Joint Venture and Investment Conversion

NSTAR Com participated in a telecommunications venture with RCN
Telecom Services, Inc. of Massachusetts, a subsidiary of RCN
Corporation (RCN).  NSTAR Com accounted for its equity investment
in the joint venture using the equity method of accounting.  As
part of the Joint Venture Agreement, NSTAR Com had the option to
exchange portions of its joint venture interest for common shares
of RCN at specified periods.

On April 6, 2000, NSTAR Com issued its third and final notice to
exchange substantially all of its remaining interest in the joint
venture into common shares of RCN.  Effective with the third
notice, NSTAR Com's profit and loss sharing ratio was reduced to
zero.

On October 18, 2000, NSTAR Com and RCN signed an agreement in
principle to amend the Joint Venture Agreement.  Although the
agreement was subject to ongoing negotiations, this proposal
established, among other items, the number of shares to be
received upon finalization of the agreement for the third
conversion of NSTAR Com's remaining equity investment at 7.5
million shares.

On June 19, 2002, NSTAR Com and RCN finalized negotiations on an
Amended Joint Venture Agreement and NSTAR Com received the
anticipated 7.5 million shares resulting from its final exchange
of its investment in the RCN joint venture.  With the receipt of
these shares, NSTAR Com holds approximately 11.6 million RCN
common shares, or approximately 10.6% of RCN's outstanding common
shares.  Prior to this final exchange, NSTAR Com had received
approximately 4.1 million shares of RCN resulting from the two
previous exchanges.

In accordance with its accounting policies, NSTAR Com
continuously evaluates the carrying value of its investment in
RCN.  Consistent with the performance of the telecommunications
sector as a whole, the market value of RCN's common shares
decreased significantly during the later part of 2000 and
continued to decrease in 2001.  As a result, in the first quarter
of 2001, management determined that this decline in market value
was "other-than-temporary" in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities."

NSTAR Com recognized an impairment of its entire investment in
RCN, in the first quarter of 2001.  This write-down resulted in a
non-cash, after-tax charge of $173.9 million that is reported on
the accompanying Condensed Consolidated Statements of Income as
"Write-down of RCN investment, net."

During 2002, the market value of RCN common shares continued to
decline and had not closed above NSTAR's carrying value of $3.75
per share since November 27, 2001.  As a result, NSTAR Com
recognized a write-down of its 11.6 million RCN common shares to
a market value of $1.37 per share as of June 30, 2002.  This
write-down resulted in a non-cash, after-tax charge of $27.6
million that is reported on the accompanying Condensed
Consolidated Statements of Income as "Write-down of RCN
investment, net."

The total carrying value of the 11.6 million RCN common shares is
included in Other investments on the accompanying Condensed
Consolidated Balance Sheets at their estimated fair value of
approximately $15.8 million at June 30, 2002.  The fair value of
the 11.6 million shares held may increase or decrease as a result
of changes in the market value of RCN common shares.  As of June
30, 2002 and December 31, 2001, the market value per share of RCN
was $1.37 and $2.93, respectively.  The unrealized gain or loss
associated with these shares will fluctuate due to the changes in
fair value of these securities during each period and is
reflected, net of associated income taxes, as a component of
Other comprehensive income, net on the accompanying Condensed
Consolidated Statements of Comprehensive Income (Loss).  The
cumulative increase or decrease in fair value of these shares as
of June 30, 2002 and includes of the impact of the write-down of
these shares and therefore, has not impacted Accumulated other
comprehensive income on the accompanying Condensed Consolidated
Balance Sheets.

H)  Service Quality Index

On October 29, 2001, and as subsequently updated, NSTAR Electric
and NSTAR Gas filed proposed service quality plans for each
company with the MDTE, which included guidelines that had been
established by the MDTE as a result of its generic investigation
of service quality issues.  The service quality plans established
performance benchmarks effective January 1, 2002 for certain
identified measures of service quality relating to customer
service and billing performance, customer satisfaction, and
reliability and safety performance.  The companies are required
to report annually concerning their performance as to each
measure and are subject to maximum penalties of up to two percent
of transmission and distribution revenues should performance fail
to meet the applicable benchmarks.  Concurrently, NSTAR Electric
and NSTAR Gas filed with the MDTE a report concerning their
performance on the identified service quality measures for the
two twelve-month periods ended August 31, 2000 and 2001.  This
report included a calculation of penalties in accordance with
MDTE guidelines as if such guidelines were in effect during this
period.  On March 22, 2002, following hearings on the matter, the
MDTE issued an order imposing a service quality penalty of
approximately $3.25 million on NSTAR Electric that was refunded
to customers as a credit to their bills during the month of May
2002.  This refund had no material effect on NSTAR's consolidated
financial position or results of operations.

Through June 30, 2002, NSTAR Electric's performance has resulted
in a slight penalty situation based on actual results through
June 2002 plus forecasted results for the remaining six-month
period.  However, these results may not be indicative of the
results that may be expected for the remainder of the year.

Also on October 29, 2001, NSTAR Electric filed with the MDTE a
comprehensive report regarding electric system performance issues
encountered during the summer of 2001.  The filing included
detailed analyses of factors affecting performance as well as the
companies' plans to address issues that were identified.  On
March 22, 2002, following a number of public hearings throughout
the NSTAR Electric service area, the MDTE issued an order finding
that NSTAR Electric had made progress in addressing the issues
that initiated the investigation and requiring that NSTAR
Electric submit further updated reports on specific issues on a
quarterly and annual basis.  NSTAR is unable to estimate its
ultimate liability for future costs or penalties as a result of
any further filings relating to this investigation.  However, in
view of NSTAR's current assessment of its electric distribution
system performance responsibilities, existing legal requirements
and regulatory policies, management believes that future costs or
penalties relating to this investment, if any, would not have a
material effect on NSTAR's consolidated financial position, cash
flows or results of operations for a reporting period.

I)  Contingencies

1.  Merger Rate Appeal

The 1999 MDTE order, which approved the rate plan associated with
the merger of BEC and COM/Energy, was appealed by certain parties
to the Massachusetts Supreme Judicial Court (SJC).  In October
2001, the MDTE certified the record of the case to the SJC.  The
appeals of the Massachusetts Attorney General (AG) and a separate
group that consists of The Energy Consortium (TEC) and Harvard
University (Harvard) are pending.  On June 21, 2002, TEC and
Harvard filed their joint initial brief with the SJC and on June
24, 2002, the AG filed a brief in the consolidated proceeding.
TEC and Harvard allege that, in approving the rate plan and
merger proposal, the MDTE committed errors of law in the
following areas: (1) in adopting a public interest standard, the
MDTE applied the wrong standard of review, and failed to
investigate the propriety of rates and to determine that the
resulting rates of Boston Edison, Cambridge Electric, ComElectric
and NSTAR Gas were just and reasonable; (2) that in permitting
Cambridge Electric and ComElectric to adjust their rates by $49.8
million to reflect demand-side management costs, the MDTE failed
to determine whether such an adjustment was warranted in light of
other cost decreases; (3) that the MDTE's approval results in an
arbitrary and unjustified sharing of benefits and costs between
ratepayers and shareholders; and (4) that the MDTE's approval of
the rate plan guarantees shareholders recovery of future costs
without any future demonstration of customer savings.  The AG's
brief includes similar arguments in each of these areas and adds
that, in allowing recovery of the acquisition premium, the MDTE
has improperly deviated from a cost basis in setting approved
rates and the ratemaking policies in other jurisdictions.
Responsive briefs from NSTAR and the MDTE are due on August 26,
2002, with a reply brief to be filed by TEC/Harvard and the AG on
September 23, 2002.  Management is currently unable to determine
the outcome of this proceeding.  NSTAR intends to vigorously
defend its position relative to this appeal.  However, if an
unfavorable outcome were to occur, there could be a material
adverse impact on the consolidated financial position, cash flows
and the results of operations for a reporting period.

2. Environmental Matters

NSTAR's subsidiaries are involved in 18 state-regulated
properties ("Massachusetts Contingency Plan, or "MCP" sites")
where oil or other hazardous materials were previously spilled or
released.  The NSTAR subsidiaries are required to clean up or
otherwise remediate these properties in accordance with specific
state regulations.  There are uncertainties associated with the
remediation costs due to the final selection of the specific
cleanup technology and the particular characteristics of the
different sites.  In addition to the MCP sites, NSTAR
subsidiaries also face possible liability as a potentially
responsible party (PRP) in the cleanup of eight multi-party
hazardous waste sites in Massachusetts and other states where one
or more NSTAR subsidiaries are alleged to have generated,
transported or disposed of hazardous waste at the sites.  NSTAR
generally expects to have only a small percentage of the total
potential liability for these sites.  Estimates of approximately
$5.7 million and $5.8 million are included as liabilities in the
accompanying Condensed Consolidated Balance Sheets at June 30,
2002 and December 31, 2001, respectively, related to the non-
recoverable portion of these cleanup liabilities.  Based on its
assessments of the specific site circumstances, management does
not believe that it is probable that any such additional costs
will have a material impact on NSTAR's consolidated financial
position.  However, it is possible that additional provisions for
cleanup costs that may result from a change in estimates could
have an impact on the results of operations for a certain
reporting period.

NSTAR Gas is participating in the assessment of six former
manufactured gas plant (MGP) sites and alleged MGP waste disposal
locations to determine if and to what extent such sites have been
contaminated and whether NSTAR Gas may be responsible for
remedial action.  The MDTE has approved recovery of costs
associated with MGP sites over a 7-year period, without carrying
costs.  As of June 30, 2002 and December 31, 2001, NSTAR Gas has
recorded a liability of $6.7 million as an estimate for site
cleanup costs for several MGP sites for which NSTAR Gas was
previously cited as a PRP.

Estimates related to environmental remediation costs are reviewed
and adjusted periodically as further investigation and assignment
of responsibility occurs and as either additional sites are
identified or NSTAR's responsibilities for such sites evolve or
are resolved.  NSTAR's ultimate liability for future
environmental remediation costs may vary from these estimates.
Although, in view of NSTAR's current assessment of its
environmental responsibilities, existing legal requirements and
regulatory policies, management does not believe that these
matters will have a material adverse effect on NSTAR's
consolidated financial position or results of operations for a
reporting period.

3. Legal Proceedings

In the normal course of its business, NSTAR and its subsidiaries
are also involved in certain legal matters, including civil
lawsuits.  Management is unable to fully determine a range of
reasonably possible court-ordered damages, settlement amounts,
and related litigation costs ("legal liabilities") that would be
in excess of amounts accrued.  Based on the information currently
available, it does not believe that it is probable that any such
additional costs will have a material impact on its consolidated
financial position.  However, it is reasonably possible that
additional legal liabilities that may result from changes in
estimates could have a material impact on the results for a
reporting period.

J)  Income Taxes
<TABLE>
<CAPTION>
The following table illustrates the reconciliation of the
statutory federal income tax rate to the annual estimated
effective income tax rate for 2002 and the actual effective
income tax rate for the year ended December 31, 2001:
<S>                                                 <C>          <C>
                                                       2002          2001
Statutory tax rate                                     35.0%         35.0%
State income tax, net of federal income tax benefit     5.1           5.3
Investment tax credits                                 (0.7)         (0.7)
Other                                                   1.3           0.6
  Effective tax rate before write-down and tax
    valuation allowance adjustment                     40.7          40.2
Adjustment to tax valuation allowance and
write-down of RCN investment (Federal and State)        3.0          57.3
  Effective tax rate                                   43.7%         97.5%
                                                       ====          ====
</TABLE>

Income taxes are accounted for in accordance with SFAS No. 109,
"Accounting for Income Taxes" (SFAS 109).  SFAS 109 requires the
recognition of deferred tax assets and liabilities for the future
tax effects of temporary differences between the carrying amounts
and the tax basis of assets and liabilities.  In accordance with
SFAS 109, net regulatory assets include $53.2 million and $53.4
million of deferred tax assets and corresponding amounts in
accumulated deferred income taxes that were recorded as of June
30, 2002 and December 31, 2001, respectively.  The regulatory
assets represent the additional future revenues to be collected
from customers for deferred income taxes.

     Tax Valuation Allowance

SFAS 109 prohibits the recognition of deferred income tax
benefits unless the utilization of future income tax benefits is
probable.  NSTAR determined that it was more likely than not that
no current or future income tax benefit would be realized
relating to the write-down of its RCN investment that was
recorded in the second quarter of 2002 and previously in the
first quarter of 2001.  As a result, NSTAR has recorded a $74.2
million tax valuation allowance on the entire tax benefit
associated with these write-downs. During the six months ended
June 30, 2002, as a result of certain unanticipated capital gain
transactions, NSTAR recognized $3.2 million of this tax benefit.
Therefore, the tax valuation allowance balance as of June 30,
2002 was $71 million.

In addition, in connection with NSTAR's previous equity
investment in the Joint Venture (JV) with RCN Telecom Services,
Inc. of Massachusetts, NSTAR has continued to claim operating
losses generated from its JV interest through June 19, 2002 for
federal income tax purposes.  NSTAR has not recorded the income
statement impact of the tax benefit of these losses,
approximately $23 million, pending a review by the Internal
Revenue Service (IRS) of the tax treatment of this item.  NSTAR
believes that the tax treatment is sufficiently uncertain to
warrant not recognizing this benefit until such time that it is
assured that the IRS will not propose an alternative tax
treatment.  The tax years in question are 1999 through 2002, and
currently years 1999 and 2000 are under review by the IRS as part
of their normal review of NSTAR's consolidated federal income tax
returns.  A determination is anticipated in the second half of
2002.  Should NSTAR prevail in its treatment of these losses as
operating losses, it would allow for the reduction of the
valuation allowance and an immediate recognition of approximately
$23 million as a credit to income tax expense.  NSTAR has and
will continue to research potential transactions that improve the
operational efficiencies of NSTAR while maximizing the
utilization of these potential tax benefits.  Should NSTAR be
successful in its tax and operational planning to allow for all
or a portion of this tax benefit to be ultimately realized, NSTAR
will reflect a credit to its income tax expense.  Future earnings
could be positively impacted by the outcome of this strategy.
The maximum potential positive future earnings impact is
currently estimated at $71 million.  Management is currently
unable to determine when, whether, or the extent to which NSTAR
will be able to recognize this potential benefit.

     Tax Gain on Generating Assets

The cost of transitioning to competition was mitigated, in part,
by the sale of Commonwealth Energy System's (Com/Energy) (now a
wholly owned subsidiary of NSTAR) non-nuclear generating assets.
COM/Energy completed the sale of substantially all of its non-
nuclear generating assets on December 30, 1998.  Proceeds from
the sale of these assets amounted to approximately $453.9 million
or 6.1 times their book value of approximately $74.2 million.
The proceeds from the sale, net of book value, transaction costs
and certain other adjustments amounted to $358.6 million and were
used to reduce transition costs of Cambridge Electric and
ComElectric related to electric industry restructuring that
otherwise would have been collected through a non-bypassable
transition charge.  COM/Energy determined that this transaction
was not a taxable event because it did not provide an economic
benefit to COM/Energy.  During the second quarter of 2002, NSTAR
was notified that the IRS intended to file a Request for
Technical Advise with the IRS National Office in regard to
Com/Energy's tax treatment of this item.

The IRS is in the process of auditing the COM/Energy tax returns
for the years 1997, 1998 and 1999.  Before completion of the
audit, and before the end of 2002, it is expected that the IRS
National Office will provide a response to the request.  Should
NSTAR's position be overturned as a result of the IRS decision,
it is probable that NSTAR will make a payment to the IRS of
approximately $61 million in order to stop the accrual of
interest on the potential tax deficiency.  NSTAR intends to
vigorously defend its position, which is supported by an
independent substantial authority opinion, relative to this
transaction and anticipates pursuing a refund of any amounts paid
plus interest.  In addition, NSTAR would pursue regulatory rate
recovery for the interest on tax deficiencies should any amounts
ultimately be incurred as a result of this transaction.  NSTAR
believes that the expectation of recovery from customers is
reasonable in light of previous conversations with the MDTE
explaining COM/Energy's position and the monetary benefits to be
realized by COM/Energy's customers should it be successful in
defending its position.  The MDTE has provided written
acknowledgement indicating their understanding of the issue and
their agreement to allow COM/Energy to seek recovery of any tax
deficiency interest that may be incurred.  However, if NSTAR is
unsuccessful, it is possible that it could have an adverse impact
on its results of operations, cash flows and financial position.

K)  Earnings Per Common Share

Basic earnings per common share (EPS) is calculated by dividing
net income, after deductions for preferred dividends, by the
weighted average common shares outstanding during the year.  SFAS
No. 128, "Earnings per Share," requires the disclosure of diluted
EPS.  Diluted EPS is similar to the computation of basic EPS
except that the weighted average common shares is increased to
include the number of dilutive potential common shares.  Diluted
EPS reflects the impact on shares outstanding of the deferred
(nonvested) shares and stock options granted under the NSTAR 1997
Share Incentive Plan.
<TABLE>
<CAPTION>
The following table summarizes the reconciling amounts between
basic and diluted EPS:

(in thousands, except per share amounts)
<S>                              <C>        <C>        <C>       <C>
                                    Three Months Ended     Six Months Ended
                                         June 30,             June 30,
                                      2002        2001      2002         2001
Before non-cash RCN charge:
  Earnings available for common
    shareholders                 $  32,801   $  36,220  $  67,105    $  76,418
  Basic EPS                          $0.62       $0.68      $1.27        $1.44
  Diluted EPS                        $0.62       $0.68      $1.26        $1.44
After non-cash RCN charge:
  Earnings (loss) available for
    common shareholders           $  5,200   $  36,220  $  39,504    $ (97,526)
  Basic EPS                          $0.10       $0.68      $0.75       $(1.84)
  Diluted EPS                        $0.10       $0.68      $0.74       $(1.84)

Weighted average common shares
  outstanding for basic EPS         53,033      53,033     53,033       53,033

Effect of diluted shares:
Weighted average dilutive
  potential common shares             298         181         261          145
Weighted average common shares
  outstanding for diluted EPS      53,331      53,214      53,294       53,178
                                  =======      ======      ======       ======
</TABLE>
L)  Segment and Related Information

For the purpose of providing segment information, NSTAR's
principal operating segments, or its traditional core businesses,
are the electric and natural gas utilities that provide energy
delivery services in over 100 cities and towns in Massachusetts.
NSTAR subsidiaries also supply electricity at wholesale to
municipalities.  The non-utility operating segments engage in
business activities that include telecommunications, district
heating and cooling operations and a liquefied natural gas
service.  Amounts shown on the following table include the
allocation of NSTAR's (Parent Company) results of operations and
assets, net of inter-company transactions, and primarily consists
of interest charges and investment assets, respectively, to these
business segments.
<TABLE>
<CAPTION>
Financial data for the operating segments were as follows:
<S>                           <C>          <C>       <C>          <C>
(in thousands)                  Utility Operations    Non-utility   Consolidated
                                Electric       Gas    Operations          Total

Three months ended June 30,
2002
Operating revenues            $  502,101    $  63,882  $  34,463     $  600,446
Segment net income (loss)(a)  $   29,210    $     845  $ (24,365)    $    5,690
2001
Operating revenues            $  641,020    $  65,634  $  25,619     $  732,273
Segment net income (loss)(a)  $   42,350    $  (1,073  $  (3,567)    $   37,710

Six months ended June 30,
2002
Operating revenues            $1,075,732    $ 177,688  $  69,891     $1,323,311
Segment net income (loss)(a)  $   48,168    $  13,502  $ (21,186)    $   40,484
2001
Operating revenues            $1,276,817    $ 262,808  $  57,470     $1,597,095
Segment net income (loss)(b)  $   69,991    $  15,413  $(179,950)    $  (94,546)

Total assets
June 30, 2002                 $5,043,643    $ 486,316  $ 222,940    $5,782,845
December 31, 2001             $4,509,982    $ 517,659  $ 300,550    $5,328,191

(a) Non-utility operations in 2002 include an impairment charge
of $27.6 million for the three and six-month periods ended June
30, 2002.  In addition, in 2002, non-utility operations include
the benefit of a deferred tax valuation allowance adjustment of
$1.6 million and $3.2 million for the three and six months ended
June 30, 2002, respectively.

(b) A $173.9 million impairment charge related to the RCN
investment was recognized in the six-month period ended June 30,
2001.
</TABLE>

M)  Electric Equity Investment

Cambridge Electric had a 2.65% equity investment in the 540 MW
Vermont Yankee nuclear power plant.  Cambridge Electric was
entitled to electricity produced from the facility based on its
ownership interest, and was billed for its entitlement pursuant
to a contractual agreement that was approved by the Federal
Energy Regulatory Commission.

On July 31, 2002, Vermont Yankee was sold for approximately $180
million to Entergy Nuclear Vermont Yankee, LLC (Entergy).  The
sale agreement stipulates, among other items, that Entergy will
assume responsibility for the ultimate decommissioning of the
facility and will receive the Vermont Yankee decommissioning
funds.  Pursuant to the terms of an Additional Power Contract,
Cambridge Electric is obligated to purchase its entitlement
percentage of the net capacity and output of the plant through
the current license term ending in March 2012.  The plant's
owners before the sale were a consortium of New England
utilities, including Cambridge Electric.  This transaction will
not have an impact on NSTAR's results of operations.  The net
result of this transaction will be included as a component of
Cambridge Electric's transition cost recovery.

Item 2.  Management's Discussion and Analysis

The accompanying Management's Discussion and Analysis (MD&A)
should be read in conjunction with the MD&A in NSTAR's 2001
Annual Report on Form 10-K and its March 31, 2002 Quarterly
Report on Form 10-Q.

Overview

NSTAR (or "the Company") is an energy delivery company serving
approximately 1.3 million customers in Massachusetts, including
approximately 1.1 million electric customers in 81 communities
and 246,000 gas customers in 51 communities.  NSTAR is an exempt
public utility holding company.  NSTAR's retail utility
subsidiaries are Boston Edison Company (Boston Edison),
Commonwealth Electric Company (ComElectric), Cambridge Electric
Light Company (Cambridge Electric) and NSTAR Gas Company (NSTAR
Gas).  Its wholesale electric subsidiary is Canal Electric
Company (Canal).  NSTAR's three retail electric companies operate
under the brand name "NSTAR Electric."  Reference in this report
to "NSTAR Electric" shall mean each of Boston Edison, ComElectric
and Cambridge Electric.  NSTAR's non-utility operations include
telecommunications - NSTAR Communications, Inc. (NSTAR Com),
district heating and cooling operations (Advanced Energy Systems,
Inc. and NSTAR Steam Corporation) and a liquefied natural gas
service company (Hopkinton LNG Corp.).

Cautionary Statement

This MD&A contains certain forward-looking statements such as
forecasts and projections of expected future performance or
statements of management's plans and objectives.  These forward-
looking statements may also be contained in filings with the
Securities and Exchange Commission (SEC) and in press releases
and oral statements.  You can identify these statements by the
fact that they do not relate strictly to historical or current
facts.  They use words such as "anticipate," "estimate,"
"expect," "project," "intend," "plan," "believe" and other words
and terms of similar meaning in connection with any discussion of
future operating or financial performance.  These statements are
based on the current expectations, estimates or projections of
management and are not guarantees of future performance.  Some or
all of these forward-looking statements may not turn out to be
what the Company expected.  Actual results could potentially
differ materially from these statements.  Therefore, no assurance
can be given that the outcomes stated in such forward-looking
statements and estimates will be achieved.

The impact of continued cost control procedures on operating
results could differ from current expectations.  NSTAR's revenues
from its electric and gas sales are weather-sensitive,
particularly sales to residential and commercial customers.
Accordingly, NSTAR's sales in any given period reflect, in
addition to other factors, the impact of weather, with colder
temperatures generally resulting in increased gas sales and
warmer temperatures generally resulting in increased electric
sales.  NSTAR anticipates that these sensitivities to seasonal
and other weather conditions will continue to impact its sales
forecasts in future periods.  The effects of changes in weather,
economic conditions, tax rates, interest rates, technology,
prices and availability of operating supplies could materially
affect the projected operating results.

NSTAR's forward-looking information depends in large measure on
prevailing governmental policies and regulatory actions,
including those of the Massachusetts Department of
Telecommunications and Energy (MDTE) and the Federal Energy
Regulatory Commission (FERC), with respect to allowed rates of
return, rate structure, financings, purchased power and cost of
gas recovery, acquisition and disposition of assets, operation
and construction of facilities, changes in tax laws and policies
and changes in and compliance with environmental and safety laws
and policies.

The impacts of various environmental, legal issues, and
regulatory matters could differ from current expectations.  New
regulations or changes to existing regulations could impose
additional operating requirements or liabilities other than
expected.  The effects of changes in specific hazardous waste
site conditions and the specific cleanup technology could affect
the estimated cleanup liabilities.  The impacts of changes in
available information and circumstances regarding legal issues
could affect any estimated litigation costs.

NSTAR undertakes no obligation to publicly update forward-looking
statements, whether as a result of new information, future
events, or otherwise.  You are advised, however, to consult any
further disclosures NSTAR makes in its filings to the SEC.  Also
note that NSTAR provided in the above paragraphs a cautionary
discussion of risks and other uncertainties relative to its
business.  These are factors that could cause its actual results
to differ materially from expected and historical performance.
Other factors in addition to those listed here could also
adversely affect NSTAR.

Significant Accounting Policies

The accompanying consolidated financial statements for each
period presented include the activities of NSTAR's wholly owned
subsidiaries.  All significant intercompany transactions have
been eliminated.  Certain reclassifications have been made to the
prior year data to conform to the current presentation.

a.  Regulatory Accounting

NSTAR follows accounting policies prescribed by the FERC and the
MDTE.  In addition, NSTAR is subject to the accounting and
reporting requirements of the SEC.  The accompanying condensed
consolidated financial statements conform to generally accepted
accounting principles (GAAP).  As a rate-regulated company, NSTAR
is subject to the Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation" (SFAS
71).  The application of SFAS 71 results in differences in the
timing of recognition of certain expenses from that of other
businesses and industries.  The energy delivery business remains
subject to rate-regulation and continues to meet the criteria for
application of SFAS 71.  This ratemaking process results in the
recording of regulatory assets based on current and future cash
inflows.  As of June 30, 2002 and December 31, 2001, NSTAR has
recorded regulatory assets of $963 million and $1,026 million,
respectively.  NSTAR continuously reviews these assets to assess
their ultimate recoverability within the approved regulatory
guidelines.  Impairment risk associated with these assets relates
to potentially adverse legislative, judicial or regulatory
actions in the future.  Plant and other regulatory assets related
to the generation business are recovered through the transition
charge.  NSTAR Electric has long-term purchased power agreements
that are used primarily to meet its standard offer obligation.
The majority of these agreements are above-market and are not
reflected on the accompanying Condensed Consolidated Balance
Sheets.  However, effective April 1, 2002, NSTAR has marked to
market six purchased power contracts that are reflective of above-
market costs.  The above market value of these contracts are
reflected as a component of Power contracts on the accompanying
Condensed Consolidated Balance Sheets.  Refer to "Significant
Accounting Policies," Item c. "Derivative Instruments" below for
a further discussion.  The above-market costs of all these
contracts are currently being recovered through the transition
charge as these costs are incurred.  This recovery occurs through
2016 for Boston Edison and through 2026 for ComElectric and
Cambridge Electric.  These recovery periods coincide with the
contractual terms of these purchased power agreements.
Furthermore, standard offer and default service revenues are
adjusted periodically to recover actual costs provided.  Standard
offer and default service revenues are recognized based on these
approved rates for energy delivery.  Refer to "Retail Electric
Rates" in this MD&A for a further discussion.

b.  New Accounting Principles

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets" (SFAS 142).  This Statement, which was
effective for NSTAR in the first quarter of 2002, establishes
accounting and reporting standards for acquired goodwill and
other indefinite lived intangible assets.  It prohibits entities
from continuing amortization of these assets.  Instead, goodwill
and other intangible assets are subject to review for impairment.
However, in accordance with provisions of SFAS 142 and a revised
amendment to SFAS 71, NSTAR will continue amortizing this asset
over its estimated regulatory recovery period and is subject to
impairment in accordance with provisions under SFAS 71.  NSTAR
has determined that its regulatory rate structure, resulting from
the merger and approved by the MDTE, supports the continued
amortization of goodwill over the period it is collected from its
customers.  A significant element of this rate plan includes
amortization of the acquisition premium over 40 years.

On July 5, 2001, the FASB issued SFAS No. 143, "Accounting for
Asset Retirement Obligations" (SFAS 143).  This Statement, which
is effective for NSTAR on January 1, 2003, establishes accounting
and reporting standards for obligations associated with the
retirement of tangible long-lived assets and the associated asset
retirement costs.  It applies to legal obligations associated
with the retirement of long-lived assets that result from the
acquisition, construction, development and/or the normal
operation of a long-lived asset, except for certain obligations
of lessees.  SFAS 143 requires entities to record the fair value
of a liability for an asset retirement obligation in the period
in which it is incurred.  When the liability is initially
recorded, the entity capitalizes the cost by increasing the
carrying amount of the related long-lived asset.  Over time, the
liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the
related asset.  Upon settlement of the liability, an entity
either settles the obligation for its recorded amount or incurs a
gain or loss upon settlement.  Management is currently assessing
the impact of SFAS 143 in light of its regulatory and accounting
requirements.  However, based on NSTAR's assessment to date, the
adoption of SFAS 143 is not expected to have a material effect on
its results of operations, cash flows, or financial position.

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-
Lived Assets" (SFAS 144), was effective January 1, 2002, and
addresses accounting and reporting for the impairment or disposal
of long-lived assets.  SFAS 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and the Long-
Lived Assets to Be Disposed Of" (SFAS 121) and APB Opinion No.
30, "Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business."  SFAS 144 retains the
fundamental provisions of SFAS 121 and expands the reporting of
discontinued operations to include all components of an entity
with operations that can be distinguished from the rest of the
entity and that will be eliminated from the ongoing operations of
the entity in a disposal transaction.  NSTAR has reviewed and
assessed for impairment certain of its non-utility assets and
based on its assessment, it has determined as of June 30, 2002,
that the implementation of SFAS 144 had no effect on NSTAR's
results of operations and financial position.

SFAS No. 146 "Accounting for Costs Associated with Exit or
Disposal Activities" (SFAS 146), requires entities to record a
liability for costs related to exit or disposal activities when
the costs are incurred.  Previous accounting guidance required
the liability to be recorded at the date of commitment to an exit
or disposal plan.  NSTAR is required to comply with SFAS 146
beginning January 1, 2003.  NSTAR is in the process of assessing
the provisions of SFAS 146 in order to determine its impact on
its financial position and results of operations.

As of January 1, 2001, NSTAR adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities", as amended by
SFAS Nos. 137 and 138, (collectively, SFAS 133).  SFAS 133
established accounting and reporting standards requiring every
derivative instrument (including certain derivative instruments
embedded in such contracts as fixed-price fuel supply and power
contracts) be recorded on the Consolidated Balance Sheets as
either an asset or liability measured at its fair value.
Previously, all of NSTAR's commodity purchased power contracts
were exempt from this accounting treatment under the normal sales
and purchased exception of SFAS 133.  As a result, these
contracts were not marked to market and has not been reflected on
the Consolidated Balance Sheets.

The impact of SFAS 133 is discussed in the following paragraph.

c.  Derivative Instruments

The accounting for derivative financial instruments is subject to
change based on the guidance received from the Derivative
Implementation Group (DIG) of FASB.  The DIG issued C15, on
October 10, 2001, which specifically addressed the interpretation
of clearly and closely related contracts that qualify for the
normal purchase and sales exception under SFAS 133.  The
conclusion reached by the DIG was that contracts with a pricing
mechanism that is subject to future adjustment based on a generic
index that is not specifically related to the contracted service
commodity, generally would not qualify for the normal purchase
and sales exception.

On April 1, 2002, the effective date of DIG C15, NSTAR adopted
the interpretation of this guidance and began marking to market
certain of its long-term purchased power contracts that
previously qualified for the normal purchase and sale exception.
NSTAR has six purchased power contracts that contain components
with pricing mechanisms that are based on a generic index, such
as the GNP or CPI and are applied to in significant factors of
these agreements.  Therefore, as required by the interpretation
of C-15, NSTAR has recorded these contracts at fair value on its
accompanying Condensed Consolidated Balance Sheets in the second
quarter of 2002.  This action resulted in the recognition of a
liability for the fair value of the above-market portion of these
contracts as of June 30, 2002 of approximately $656 million and
is a component of Power contracts on the accompanying Condensed
Consolidated Balance Sheets.  NSTAR has recorded a corresponding
regulatory asset to reflect the future recovery of the above-
market component of these contracts through its transition
charge.  Therefore, as a result of this regulatory treatment, the
recording of these contracts on its accompanying Condensed
Consolidated Balance Sheets does not result in an earnings
impact.

NSTAR has other purchased power contracts in which the fair value
is significantly above-market.  However, these contracts have met
the criteria for normal purchase and sales exception and have not
been recorded on the accompanying Condensed Consolidated Balance
Sheets.  The above market portion of these contracts are
currently being recovered through the transition charge.

NSTAR will continue to monitor any further guidance that may
result from FASB revisions and clarifications to SFAS 133.  Based
on NSTAR's assessment to date, the adoption of SFAS 133 has not
had a material effect on its results of operations, cash flows,
or financial position.

d.  Revenue Recognition

Utility revenues are based on authorized rates approved by the
FERC and the MDTE.  Estimates of transmission, distribution and
transition revenues for electricity and natural gas delivered to
customers but not yet billed are accrued at the end of each
accounting period.  Included as a component of transition
revenues is the recovery of all above-market purchased power
costs.  The determination of unbilled revenues requires
management to estimate the volume and pricing of gas and
electricity delivered to customers prior to actual meter
readings.

Revenues for NSTAR's non-utility subsidiaries are recognized when
services are rendered or when the energy is delivered.  Revenues
are based, for the most part, on long-term contractual rates.

e.  Available for Sale Equity Securities

NSTAR records its investment in marketable equity securities in
accordance with SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities."  Pursuant to this standard, NSTAR
continuously reviews the carrying value of its investments in
marketable equity securities to assess whether any decline in the
market value below its carrying value is deemed to be other-than-
temporary.  Unless there is evidence to the contrary, NSTAR's
policy is to record an impairment charge for the decline in
market value below its carrying value in situations where the
decline has continued for a period of six months or more.  During
the second quarter of 2002, NSTAR determined that the decline in
its investment in RCN Corporation (RCN) was other than temporary.
As a result, NSTAR recognized a $27.6 million impairment charge
to its current earnings.  The total carrying value of its 11.6
million common shares of RCN is $15.8 million and is reflective
of a market value per share of $1.37.  These securities are
currently available for sale and are included in Other
investments on the accompanying Condensed Consolidated Balance
Sheets.

f.  Use of Estimates

The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions, which
requires a consideration of all pertinent facts and circumstances
and the use of professional judgment.  These factors affect the
carrying values of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period.  The majority of these estimates are
primarily of a short-term duration.  However, actual results
could differ from these estimates for a covered reporting period.

g.  Asset Impairment Assessment

Based on the current market performance of the telecommunications
sector, NSTAR has reviewed and assessed for impairment, in
accordance with SFAS 144, its unregulated telecommunications
assets.  NSTAR's judgements used in its assessment includes, but
is not limited to, future anticipated revenue streams and future
operating costs.  NSTAR has determined, based on its probability
assessment, that the carrying values of its unregulated
telecommunications assets are not impaired as of June 30, 2002.
Management cannot assure the precision of its estimates of future
revenues or expenses.  Should a further and continued
deterioration of this business sector occur, NSTAR may be
required to write-down its carrying value of these assets.

h.  Accounting for Stock Options

The NSTAR 1997 Share Incentive Plan (the Plan) permits a variety
of stock and stock-based awards, including the granting to key
employees of stock options and deferred (non-vested) stock.  The
Plan limits the terms of option awards to ten years.  Currently,
NSTAR continues to account for stock options pursuant to APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and
does not recognize an expense currently.  Based on a provision of
the Plan that establishes the exercise price equal to the market
price at the grant date, no current recognition is necessary.
However, if NSTAR had expensed these options since its plan
inception under the provision of SFAS No. 123, "Accounting for
Stock-Based Compensation," the additional expense to earnings for
the first six months of 2002 would be approximately $300,000, net
of tax, or $.006 per share.

i.  Income Taxes

Income taxes are accounted for in accordance with SFAS No. 109,
"Accounting for Income Taxes" (SFAS 109).  SFAS 109 requires the
recognition of deferred tax assets and liabilities for the future
tax effects of temporary differences between the carrying amounts
and the tax basis of assets and liabilities.  In accordance with
SFAS 109, NSTAR has established policies and has made
determinations on significant tax matters in arriving at certain
estimations of future tax benefits or liabilities.  Reference is
made to the "Income Tax Issues" section of this MD&A for a
discussion of NSTAR's significant tax matters, including
accounting for its tax valuation allowance and its position on
the tax treatment taken for the sale of generating facilities in
1998.

Generating Assets Divestiture

     Seabrook Nuclear Power Station

On April 15, 2002, FPL Group, Inc. agreed to buy an 88% majority
ownership interest in the Seabrook Nuclear Power Station,
including NSTAR's 3.52% ownership interest, for $836.6 million.
The purchase agreement was reached through an auction process
launched in late 2001.  FPL Group will assume responsibility for
the ultimate decommissioning of the facility and will receive the
Seabrook decommissioning funds, expected to be approximately $233
million, at closing that is expected to occur in late 2002.  This
sale will complete the final divestiture of NSTAR's remaining
regulated generating assets.  NSTAR expects to receive less than
its net investment in Seabrook as a result of this sale.  Its
remaining investment will be recovered from customers through the
transition charge.  This transaction will not have an impact on
NSTAR's results of operations.  The net result of this
transaction will be included as a component of Cambridge
Electric's and ComElectric's transition cost recovery.

     Blackstone Station

On August 1, 2002, Cambridge Electric and NSTAR Steam reached an
agreement to sell Blackstone Station to Harvard University for
$17.6 million.  Under terms of this agreement, NSTAR Steam will
continue to manage the day-to-day operations of the steam plant
for one year after the sale.

Blackstone Station has generated electricity and steam since
1930.  Cambridge Electric is divesting its electric generating
assets consistent with the provisions of the Massachusetts
Electric Restructuring Act of 1997 (Restructuring Act).
Cambridge Electric divested the majority of its non-nuclear
generating facilities in 1998.  The sale is subject to approval
by the MDTE and $14.6 of the proceeds from the sale will be used
to reduce Cambridge Electric's transition charge.  An additional
$3 million in connection with the sale of this facility is
associated with NSTAR Steam and will result in a probable gain of
approximately the same amount.

Rate and Regulatory Proceedings

An integral part of the merger creating NSTAR is the rate plan of
the retail utility subsidiaries that was approved by the MDTE on
July 27, 1999.  Significant elements of the rate plan include a
four-year distribution rate freeze, recovery of the acquisition
premium (goodwill) over 40 years and recovery of transaction and
integration costs (costs to achieve) over 10 years.  Refer to the
"Retail Electric Rates" section of this MD&A for more
information.

The 1999 MDTE order, which approved the rate plan associated with
the merger of BEC and COM/Energy, was appealed by certain parties
to the Massachusetts Supreme Judicial Court (SJC).  In October
2001, the MDTE certified the record of the case to the SJC.  The
appeals of the Massachusetts Attorney General (AG) and a separate
group that consists of The Energy Consortium (TEC) and Harvard
University (Harvard) are pending.  On June 21, 2002, TEC and
Harvard filed their joint initial brief with the SJC and on June
24, 2002, the AG filed a brief in the consolidated proceeding.
TEC and Harvard allege that, in approving the rate plan and
merger proposal, the MDTE committed errors of law in the
following areas: (1) in adopting a public interest standard, the
MDTE applied the wrong standard of review, and failed to
investigate the propriety of rates and to determine that the
resulting rates of Boston Edison, Cambridge Electric, ComElectric
and NSTAR Gas were just and reasonable; (2) that in permitting
Cambridge Electric and ComElectric to adjust their rates by $49.8
million to reflect demand-side management costs, the MDTE failed
to determine whether such an adjustment was warranted in light of
other cost decreases; (3) that the MDTE's approval results in an
arbitrary and unjustified sharing of benefits and costs between
ratepayers and shareholders; and (4) that the MDTE's approval of
the rate plan guarantees shareholders recovery of future costs
without any future demonstration of customer savings.  The AG's
brief includes similar arguments in each of these areas and adds
that, in allowing recovery of the acquisition premium, the MDTE
has improperly deviated from a cost basis in setting approved
rates and the ratemaking policies in other jurisdictions.
Responsive briefs from NSTAR and the MDTE are due on August 26,
2002 with a reply brief to be filed by TEC/Harvard and the AG on
September 23, 2002.  Management is currently unable to determine
the outcome of this proceeding.  NSTAR intends to vigorously
defend its position relative to this appeal.  However, if an
unfavorable outcome were to occur, there could be a material
adverse impact on business operations, the consolidated financial
position, cash flows and the results of operations for a
reporting period.

Goodwill relating to the merger amounted to approximately $490
million, resulting in annual amortization of goodwill of
approximately $12.2 million.  Costs to achieve are being
amortized based on the filed estimate of $111 million over 10
years.  NSTAR's retail utility subsidiaries will reconcile the
ultimate costs to achieve with that estimate, and it is expected
that any difference will be recovered from customers.  A majority
of costs to achieve the merger were severance costs associated
with a voluntary separation program.  These amounts are offset by
ongoing cost savings from streamlined operations and avoidance of
costs that would have otherwise been incurred prior to the
merger.  Refer to the "New Accounting Principles" section of this
MD&A for further information.

On October 29, 2001, and as subsequently updated, NSTAR Electric
and NSTAR Gas filed proposed service quality plans for each
company with the MDTE, which included guidelines that had been
established by the MDTE as a result of its generic investigation
of service quality issues.  The service quality plans established
performance benchmarks effective January 1, 2002 for certain
identified measures of service quality relating to customer
service and billing performance, customer satisfaction, and
reliability and safety performance.  The companies are required
to report annually concerning their performance as to each
measure and are subject to maximum penalties of up to two percent
of transmission and distribution revenues should performance fail
to meet the applicable benchmarks.  Concurrently, NSTAR Electric
and NSTAR Gas filed with the MDTE a report concerning their
performance on the identified service quality measures for the
two twelve-month periods ended August 31, 2000 and 2001.  This
report included a calculation of penalties in accordance with
MDTE guidelines.  On March 22, 2002, following hearings on the
matter, the MDTE issued an order imposing a service quality
penalty of approximately $3.25 million on NSTAR Electric that was
refunded to customers as a credit to their bills during the month
of May 2002.  This refund had no material effect on NSTAR's
consolidated financial position, cash flows or results of
operations.

Through June 30, 2002 NSTAR Electric's performance has resulted
in a slight penalty situation based on actual results through
June 2002 plus forecasted results for the remaining six-month
period.  However, these results may not be indicative of the
results that may be expected for the remainder of the year,
including the peak-demand period anticipated during the remainder
of the summer period.

Also on October 29, 2001, NSTAR Electric filed with the MDTE a
comprehensive report regarding electric system performance issues
encountered during the summer of 2001.  The filing included
detailed analyses of factors affecting performance as well as the
companies' plans to address issues that were identified.  On
March 22, 2002, following a number of public hearings throughout
the NSTAR Electric service area, the MDTE issued an order finding
that NSTAR Electric had made progress in addressing the issues
that initiated the investigation and requiring that NSTAR
Electric submit further updated reports on specific issues on a
quarterly and annual basis.  NSTAR is unable to estimate its
ultimate liability for future costs or penalties as a result of
any further filings relating to this investigation.  However, in
view of NSTAR's current assessment of its electric distribution
system performance responsibilities, existing legal requirements
and regulatory policies, management believes it would not have a
material effect on NSTAR's consolidated financial position, cash
flows or results of operations for a reporting period.

Retail Electric Rates

The Restructuring Act requires electric distribution companies to
obtain and resell power to retail customers who choose not to buy
energy from a competitive energy supplier through either standard
offer service or default service.  Standard offer service will be
available to eligible customers through February 2005 at prices
approved by the MDTE, set at levels so as to guarantee mandatory
overall rate reductions provided by the Restructuring Act.  New
retail customers in the NSTAR Electric service territories and
other customers who are no longer eligible for standard offer
service and have not chosen to receive service from a competitive
supplier are provided default service.  The price of default
service is intended to reflect the average competitive market
price for power.  As of June 30, 2002 and December 31, 2001,
NSTAR Electric had approximately 25% and 16%, respectively, of
its load requirements provided by competitive suppliers.

During 2000, NSTAR Electric's accumulated cost to provide default
and standard offer service was in excess of the revenues it was
allowed to bill by approximately $242.7 million.  On January 1
and July 1, 2001, NSTAR Electric was permitted by the MDTE to
increase its rates to customers for standard offer and default
service to collect this shortfall.  Furthermore, when combined
with the reduction in energy supply costs experienced in 2001 and
through the first half of 2002, rates were reduced on January 1,
2002 in anticipation of further reduced costs and resulted in a
corresponding reduction in regulatory assets to $13.1 million and
$45.4 million as of June 30, 2002 and December 31, 2001,
respectively.

In December 2000, the MDTE approved a standard offer fuel index
of 1.321 cents per kilowatt-hour (kWh) that was added to each
NSTAR Electric company's standard offer service rates for the
first half of 2001.  In June 2001, the MDTE approved an
additional increase of 1.23 cents per kWh effective July 1, 2001
based on a fuel adjustment formula contained in its standard
offer tariffs to reflect the prices of natural gas and oil.  In
December 2001, the MDTE approved a decrease in this fuel index of
1.125 cents to 1.426 cents per kWh for the first quarter of 2002
based on a decrease in the cost of fuel.  Effective April 1,
2002, each NSTAR Electric company's fuel index was set to zero.
The MDTE has ruled that these fuel index adjustments are excluded
from the 15% rate reduction requirement under the Restructuring
Act.

In December 2001, NSTAR Electric filed proposed transition rate
adjustments for 2002, including a preliminary reconciliation of
costs and revenues through 2001.  The MDTE subsequently approved
tariffs for each retail electric subsidiary effective January 1,
2002.  The filings were updated in February 2002 to include final
costs for 2001.  The MDTE approved the reconciliation of costs
and revenues for Boston Edison through 2000 in its approval on
November 16, 2001 of a Settlement Agreement between Boston Edison
and the Massachusetts Attorney General (AG) resolving all
outstanding issues in Boston Edison's prior reconciliation
filings.  As a part of this settlement, Boston Edison agreed to
reduce the costs sought to be collected through the transition
charge by approximately $2.9 million as compared to the amounts
that were originally sought.  This settlement did not have a
material adverse effect on NSTAR's consolidated financial
position, results of operations or cash flows.

On June 1, 2001, the MDTE issued its final orders on the
reconciliation of ComElectric and Cambridge Electric's
transition, standard offer service, default service and
transmission costs and revenues for 1998.  ComElectric and
Cambridge Electric reached a settlement with the AG regarding the
1999 and 2000 reconciliation proceedings.  Under this settlement,
the companies' future recovery of transition costs would be
reduced by approximately $7.8 million.  This settlement was
approved by the MDTE on June 5, 2002 and did not have a material
adverse effect on NSTAR's consolidated financial position, cash
flows or results of operations.

Natural Gas Industry Restructuring and Rates

NSTAR Gas generates revenues primarily through the sale and/or
transportation of natural gas.  Gas sales and transportation
services are divided into two categories: firm, whereby NSTAR Gas
must supply gas and/or transportation services to customers on
demand; and interruptible, whereby NSTAR Gas may, generally
during colder months, temporarily discontinue service to high
volume commercial and industrial customers.  Sales and
transportation of gas to interruptible customers do not
materially affect NSTAR Gas' operating income because
substantially all of the margin on such service is returned to
its firm customers as cost reductions.

In addition to delivery service rates, NSTAR Gas' tariffs include
a seasonal Cost of Gas Adjustment Clause (CGAC) and a Local
Distribution Adjustment Clause (LDAC).  The CGAC provides for the
recovery of all gas supply costs from firm sales customers or
default service customers.  The LDAC provides for the recovery of
certain costs applicable to both sales and transportation
customers.  The CGAC is filed semi-annually for approval by the
MDTE.  The LDAC is filed annually for approval.

In October 2001, due to the significant decline in wholesale
natural gas prices, NSTAR Gas received approval from the MDTE to
reduce the CGAC factor for the period from November 1, 2001
through April 30, 2002 to $0.5261 per therm.  In December 2001,
NSTAR Gas received approval to further reduce its CGAC factor by
17% to $0.4350 per therm effective January 1, 2002.  In January
2002, NSTAR Gas again filed and the MDTE approved a reduction of
the NSTAR Gas CGAC factor that became effective February 1, 2002
to $0.3834 per therm as a result of the continuing decline in its
supply costs.  This represented a 59% decrease from the weighted
average factor in effect during the prior winter season.  NSTAR
Gas received approval from the MDTE to decrease the CGAC to
$0.3828 per therm effective May 1, 2002, an approximate 50%
decline in rates from May 1, 2001.  This filing represents the
sixth time in the prior twelve-month period that NSTAR Gas has
decreased the CGAC and passed those savings on to customers.

Other Legal Matters

In the normal course of its business, NSTAR and its subsidiaries
are also involved in certain other legal matters, including civil
lawsuits.  Management is unable to fully determine a range of
reasonably possible court-ordered damages, settlement amounts,
and related litigation costs ("legal liabilities") that would be
in excess of amounts accrued.  Based on the information currently
available, Management does not believe that it is probable that
any such additional costs will have a material impact on its
consolidated financial position.  However, it is reasonably
possible that additional legal liabilities that may result from
changes in estimates could have a material impact on the results
of operations for a reporting period.

Income Tax Issues

     Tax Valuation Allowance

SFAS 109 prohibits the recognition of deferred income tax
benefits unless the utilization of future income tax benefits is
probable.  NSTAR determined that it was more likely than not that
no current or future income tax benefit would be realized
relating to the write-down of its RCN investment that was
recorded in the second quarter of 2002 and previously in the
first quarter of 2001.  As a result, NSTAR has recorded a $74.2
million tax valuation allowance on the entire tax benefit
associated with these write-downs. During the six months ended
June 30, 2002, as a result of certain unanticipated capital gain
transactions, NSTAR recognized $3.2 million of this tax benefit.
Therefore, the tax valuation allowance balance as of June 30,
2002 was $71 million.

In addition, in connection with NSTAR's previous equity
investment in the Joint Venture (JV) with RCN Telecom Services,
Inc. of Massachusetts, NSTAR has continued to claim operating
losses generated from its JV interest through June 19, 2002 for
federal income tax purposes.  NSTAR has not recorded the income
statement impact of the tax benefit of these losses,
approximately $23 million, pending a review by the Internal
Revenue Service (IRS) of the tax treatment of this item.  NSTAR
believes that the tax treatment is sufficiently uncertain to
warrant not recognizing this benefit until such time that it is
assured that the IRS will not propose an alternative tax
treatment.  The tax years in question are 1999 through 2002, and
currently years 1999 and 2000 are under review by the IRS as part
of their normal review of NSTAR's consolidated federal income tax
returns.  A determination is anticipated in the second half of
2002.  Should NSTAR prevail in its treatment of these losses as
operating losses, it would allow for the reduction of the
valuation allowance and an immediate recognition of approximately
$23 million as a credit to income tax expense.  NSTAR has and
will continue to research potential transactions that improve the
operational efficiencies of NSTAR while maximizing the
utilization of these potential tax benefits.  Should NSTAR be
successful in its tax and operational planning to allow for all
or a portion of this tax benefit to be ultimately realized, NSTAR
will reflect a credit to its income tax expense.  Future earnings
could be positively impacted by the outcome of this strategy.
The maximum potential positive future earnings impact is
currently estimated at $71 million.  Management is currently
unable to determine when, whether, or the extent to which NSTAR
will be able to recognize this potential benefit.

     Tax Gain on Generating Assets

The cost of transitioning to competition was mitigated, in part,
by the sale of Commonwealth Energy System's (Com/Energy) (now a
wholly owned subsidiary of NSTAR) non-nuclear generating assets.
COM/Energy completed the sale of substantially all of its non-
nuclear generating assets on December 30, 1998.  Proceeds from
the sale of these assets amounted to approximately $453.9 million
or 6.1 times their book value of approximately $74.2 million.
The proceeds from the sale, net of book value, transaction costs
and certain other adjustments amounted to $358.6 million and were
used to reduce transition costs of Cambridge Electric and
ComElectric related to electric industry restructuring that
otherwise would have been collected through a non-bypassable
transition charge.  COM/Energy determined that this transaction
was not a taxable event because it did not provide an economic
benefit to COM/Energy.  During the second quarter of 2002, NSTAR
was notified that the IRS intended to file a Request for
Technical Advise with the IRS National Office in regard to
Com/Energy's tax treatment of this item.

The IRS is in the process of auditing the COM/Energy tax returns
for the years 1997, 1998 and 1999.  Before completion of the
audit, and before the end of 2002, it is expected that the IRS
National Office will provide a response to the request.  Should
NSTAR's position be overturned as a result of the IRS decision,
it is probable that NSTAR will make a payment to the IRS of
approximately $61 million in order to stop the accrual of
interest on the potential tax deficiency.  NSTAR intends to
vigorously defend its position, which is supported by an
independent substantial authority opinion, relative to this
transaction and anticipates pursuing a refund of any amounts paid
plus interest.  In addition, NSTAR would pursue regulatory rate
recovery for the interest on tax deficiencies should any amounts
ultimately be incurred as a result of this transaction.  NSTAR
believes that the expectation of recovery from customers is
reasonable in light of previous conversations with the MDTE
explaining COM/Energy's position and the monetary benefits to be
realized by COM/Energy's customers should it be successful in
defending its position.  The MDTE has provided written
acknowledgement indicating their understanding of the issue and
their agreement to allow COM/Energy to seek recovery of any tax
deficiency interest that may be incurred.  However, if NSTAR is
unsuccessful, it is possible that it could have an adverse impact
on its results of operations, cash flows and financial position.

Results of Operations - Three Months Ended June 30, 2002 vs.
Three Months Ended June 30, 2001

The following section of Management's Discussion and Analysis
compares the results of operations for each of the three month
periods ended June 30, 2002 and 2001, respectively, and should be
read in conjunction with the condensed consolidated financial
statements and the accompanying notes included elsewhere in this
report.
<TABLE>
<CAPTION>
Earnings per common share were as follows:
<S>                          <C>         <C>      <C>
                              Three Months Ended June 30,
                                 2002       2001   % Change
 Basic and Diluted-
 After RCN charge              $ 0.10    $ 0.68     (85.3)
 Before RCN charge             $ 0.62    $ 0.68      (8.8)
</TABLE>
Earnings were $5.2 million, or $0.10 per basic and diluted common
share, respectively, for the three-month period ended June 30,
2002 and include a non-cash, after-tax charge of $27.6 million,
or $0.52 per basic share, related to the impairment of NSTAR's
investment in RCN Corporation (RCN) that is further discussed
below.  For the same period in 2001, NSTAR reported income of
$36.2 million, or $0.68 per basic and diluted common share.

Absent the RCN charge, the current quarter's earnings declined by
$3.4 million, or 9.4%, primarily due to increased operations and
maintenance costs for electrical systems reliability upgrades
associated with electric delivery operations.  In addition, there
was a $13.6 million increase in operations and maintenance
expense that reflects higher pension-related benefits costs,
lower mitigation incentive revenues of $2.2 million and higher
costs related to the System Improvement Program.  Positive
factors during the current three-month period included lower bad
debt expense, a $1.6 million deferred tax benefit resulting from
an adjustment to NSTAR's tax valuation allowance, lower long and
short-term interest costs of $8.5 million, net of regulatory
interest, and a $1 million decrease in preferred dividends as a
result of the redemption of Boston Edison's Cumulative Preferred
Stock, 8% Series in December 2001.

Consistent with the performance of the telecommunications sector
as a whole, the market value of RCN's common shares has continued
to decrease significantly.  On June 19, 2002, NSTAR received an
additional 7.5 million shares from the third and final exchange
of its investment in the RCN joint venture pursuant to an amended
Joint Venture Agreement.  The market value of RCN common shares
continued to decline during 2002 and had not closed above NSTAR's
carrying value of $3.75 per share since November 27, 2001.  As a
result, NSTAR recognized a $27.6 million write-down of its total
11.6 million RCN shares to a market value of $1.37 per share as
of June 30, 2002.

The results of operations for the three-month period ended June
30, 2002, exclusive of the RCN write-down, are not indicative of
the results that may be expected for the entire year due to the
seasonality of electric and gas sales and revenues.  Refer to
Note B to the accompanying Unaudited Condensed Consolidated
Financial Statements.

Operating revenues
<TABLE>
<CAPTION>
Operating revenues for the three-month period ended June 30, 2002
decreased 18% from the same period in 2001 as follows:
<S>                                             <C>
  (in thousands)
  Retail electric revenues                         $(118,866)
  Wholesale electric revenues                         (2,985)
  Gas sales revenues                                  (3,520)
  Other revenues                                      (6,456)
    Decrease in operating revenues                 $(131,827)
                                                    =========
</TABLE>
The most significant factor contributing to this decrease in
operating revenues was the reduction in standard offer and
default rates charged to customers.

Retail electric revenues were $475.1 million in the second
quarter of 2002 compared to $594 million in the same period of
2001, a decrease of $118.9 million, or 20%.  The change in retail
revenues includes the significantly lower cost of purchased power
(discussed below) and lower rates implemented in January 2002 for
standard offer and default services adjusted for decreases in the
cost of energy supply.  The total decrease in retail revenues
also includes lower revenue related to demand-side management
programs of $2.4 million due to the timing of program
expenditures.  Transition revenues increased by $4.9 million due
to higher rates for transition cost recovery offset by a $2.2
million decline in earned mitigation incentive revenues that were
allowed for successfully lowering transition charges.
Transmission revenues increased by $1.7 million due to higher
rates.  The change in NSTAR's retail revenues related to standard
offer, default services and demand-side management are reconciled
to the costs incurred and do not have a significant impact on
future earnings.

Although retail distribution and firm gas revenues increased
slightly from the prior year, retail revenue is being impacted by
weaker economic conditions as indicated by the lower Boston hotel
occupancy rate that was down 7.2% when compared to 2001 and a
Boston office vacancy rate that remains comparably high.  The
unemployment rate in Boston was approximately 4% as of June 30,
2002 as compared to approximately 3% at the same time in 2001.
NSTAR Electric's sales to residential and commercial customers
were approximately 28% and 61%, respectively, of its total retail
sales mix for the current three-month period and provided 41% and
51% of distribution revenue, respectively.  Industrial sector
sales are being impacted by a slowdown in economic conditions
that resulted from reduced production or facility closings.  The
industrial sector comprises approximately 10% of NSTAR's energy
sales and 6% of distribution revenue.

Weather conditions slightly impacted the change in electric
revenues.  Temperatures were slightly below normal for the second
quarter of 2002.  Below is comparative information on heating and
cooling degree days for the three-month periods ending June 30,
2002 and 2001 and the number of degree days in a "normal" second
quarter period as represented by a 30-year average.  A "degree-
day" is a unit measuring how much the outdoor mean temperature
falls below (for heating) or rises above (for cooling), a base of
65 degrees.  Each degree below or above the base, is measured in
one degree day.
<TABLE>
<CAPTION>
<S>                                   <C>           <C>          <C>
                                                                    Normal
                                                                   30-Year
                                          2002          2001       Average

Heating degree days                        854           779           807
  Percentage change from prior year        9.6%        (13.0)%
  Percentage change from 30-year average   5.8%         (3.5)%


Cooling degree days                        159            276          175
  Percentage change from prior year      (42.4)%         66.3%
  Percentage change from 30-year average  (9.1)%         57.7%

</TABLE>
The lower cooling degree days experienced during the current
quarter negatively impacted electric distribution revenues more
than the higher heating degree days positively impacted gas
energy revenues due to the decline from the same period last year
and the normal average days when air conditioning would have been
in demand by NSTAR's significantly higher electric customer base.

Wholesale electric revenues were $16.9 million in the second
quarter of 2002 compared to $19.9 million in the same period of
2001, a decrease of $3 million, or 15%.  This decrease in
wholesale revenues reflects a 17.9% decrease in kWh sales due to
the expiration of two municipal power supply contracts on May 31,
2002 and a decline in rates.  Amounts collected from wholesale
customers are credited to retail customers through the transition
charge.  Therefore, the expiration of these contracts has no
impact on net income.

Gas sales revenues were $62.6 million in the quarter ended June
30, 2002 compared to $66.2 million in the same period of 2001, a
decrease of $3.5 million, or 5%.  The decrease in revenues is
attributable to a 13% decline in the cost of gas from suppliers
from the same period last year, and the 2.7% decline in Billions
of British Thermal Unit (BBTU) firm sales due to the downturn in
the economy.  The impact of the cooler temperatures slightly
offset the economic slowdown.  NSTAR Gas' firm sales to
residential, commercial and industrial customers were
approximately 40%, 44% and 10%, respectively, of total firm sales
for the current three-month period.

Other revenues were $45.8 million in the three months ended June
30, 2002 compared to $52.2 million in the same period of 2001, a
decrease of $6.4 million, or 12%.  This decrease primarily
reflects lower steam sales that reflect the loss of a large
customer and lower fuel costs, partially offset by chilled water
and electric rate increases.

Operating expenses

Purchased power costs were $273.1 million in the quarter ended
June 30, 2002 compared to $395.1 million in the same period of
2001, a decrease of $122 million, or 31%.  The decrease in
expense reflects lower purchased power requirements due to a
17.9% decrease in wholesale sales due to the expiration of two
power supply contracts and lower costs that reflect the prices of
natural gas and oil.  Included in the current and prior year
periods was $13.6 million and $35 million, respectively, that
reflects the recognition of previously deferred standard offer
and default service supply costs resulting from the current
period collection of these costs.  NSTAR adjusts its electric
rates to collect the costs related to energy supply from
customers on a reconciling basis.  Due to the rate adjustment
mechanisms, changes in the amount of energy supply expense does
not have a significant impact on earnings.  The cost of gas sold,
representing NSTAR Gas' supply expense, was $34 million for the
quarter ended June 30, 2002, compared to $39.3 million in the
same period of 2001, a decrease of $5.3 million, or 13%, due to
the recognition of the lower cost of gas and lower sales due to
the downturn in the economy.  These expenses are also reconciled
to the current level of revenues collected.

Operations and maintenance expense was $108.6 million in the
quarter ended June 30, 2002 compared to $95 million in the same
period of 2001, an increase of $13.6 million, or 14%.  This
increase primarily reflects $4.4 million incurred in connection
with the incremental expenditure relating to the electric
delivery system, an increase of $6.2 million in pension-related
costs due to a downturn in the equity market and lower interest
costs that are expected to continue for the remainder of 2002,
and a $2.5 million loss incurred that related to a settlement
adjustment.  The higher pension costs are in line with NSTAR's
previous disclosure of its forecast that indicated that pension
costs for 2002 as compared to 2001 would increase.  This trend is
anticipated to continue through 2003 as a result of further
declines in the equity market.  These factors were somewhat
offset by a decline in bad debt expense of $2.4 million.

Depreciation and amortization expense was $56.9 million in the
quarter ended June 30, 2002 compared to $55 million in the same
period of 2001, an increase of $1.8 million, or 3%.  The increase
primarily reflects higher depreciable plant in service.

Demand side management (DSM) and renewable energy programs
expense was $15.4 million in the quarter ended June 30, 2002
compared to $18.7 million in the same period of 2001, a decrease
of $3.3 million, or 17%, primarily due to timing of DSM expense
which is consistent with the collection of conservation and
renewable energy revenues.  These costs are collected from
customers on a reconciling basis and as a result, fluctuations in
program costs should not have an impact on earnings.  In
addition, NSTAR earns incentive revenues in return for increased
customer participation.

Property and other taxes were $24.2 million in the quarter ended
June 30, 2002 compared to $22.5 million in the same period of
2001, an increase of $1.7 million, or 8%.  This increase was due
to higher municipal property taxes, particularly for the City of
Boston.  Payroll and other taxes remained at the same level as
last year.

Income taxes from operations were $19.1 million in the quarter
ended June 30, 2002 compared to $25 million in the same period of
2001, a decrease of $5.9 million, or 23%, reflecting lower pre-
tax operating income.

Other income (deductions)

Other deductions were $21.7 million in the second quarter of 2002
compared to income of $2.5 million in the same period of 2001, a
net decrease in income of $24.2 million directly attributable to
the aforementioned non-cash charge related to the carrying value
of the RCN investment that is discussed more fully below.

Absent the $27.6 million write-down of the RCN investment, other
income was $5.9 million in the quarter ended June 30, 2002
compared to income of $2.5 million in the same period of 2001, a
net increase in income of $3.4 million  due primarily to a
deferred tax valuation allowance adjustment of $1.6 million and
the recognition of gains of $2.4 million resulting from the sale
of equity securities.  In the second quarter of 2001, other
income included the recognition of $4.5 million of income
associated with the receipt of equity securities in connection
with the demutualization of John Hancock Financial Services, Inc.
(John Hancock) and MetLife.  Other income also includes income
from non-utility operations and includes the sale of emissions
allowances.

Interest charges

Interest on long-term debt and transition property securitization
certificates was $37.3 million in the quarter ended June 30, 2002
compared to $40 million in the same period of 2001, a decrease of
$2.7 million, or 7%.  The decrease in interest expense reflects
the retirement of $24.3 million of Boston Edison 9.375%
Debentures in August 2001, NSTAR Gas' 8.99% Bonds of $3.5 million
December 2001 and ComElectric's 9.3%, $30 million Term Loan in
early January 2002, additional sinking fund payments and the
repayment of transition property securitization certificates
outstanding that resulted in reduced interest expense of $1.1
million.

Short-term and other interest expense, excluding regulatory
interest expense, was $4.3 million for the quarter ended June 30,
2002 compared to $10.1 million in the same period of 2001, a
decrease of $5.8 million, or 58%.  This decrease was due to a
significant reduction in short-term borrowing rates and an
approximate $64 million reduction in the average daily balances
outstanding.  Effective short-term borrowing rates averaged
approximately 1.9% for the period ended June 30, 2002 as compared
to approximately 5.3% in the same period last year.  The
reduction in short-term and other interest costs was partially
offset by a $1.7 million change in regulatory interest expense
due to a reduction in the under-collection of regulatory
deferrals.  The decrease in borrowing is primarily the result of
lower working capital requirements due to lower revenues and
improved collections of customer accounts receivable.

Allowance for borrowed funds used in construction (AFUDC)
decreased by $2 million, or 93%, due to the absence in the
current period of capitalized interest related to the
construction of an NSTAR office building and lower AFUDC rates.

Results of Operations - Six Months Ended June 30, 2002 vs. Six
Months Ended June 30, 2001

The following section of Management's Discussion and Analysis
compares the results of operations for each of the six-month
periods ended June 30, 2002 and 2001, respectively, and should be
read in conjunction with the condensed consolidated financial
statements and the accompanying notes included elsewhere in this
report.
<TABLE>
<CAPTION>
Earnings (Loss) per common share were as follows:
<S>                           <C>       <C>       <C>
                                  Six Months Ended June 30,
                                 2002       2001   % Change
 Basic -
 After RCN charge              $ 0.75   $(1.84)      140.8
 Before RCN charge             $ 1.27   $ 1.44       (11.8)

 Diluted -
 After RCN charge              $ 0.74   $(1.83)      140.4
 Before RCN charge             $ 1.26   $ 1.44       (12.5)
</TABLE>
Earnings were $39.5 million, or $0.75 and $0.74 per basic and
diluted common share, respectively, for the first six months of
2002.  Earnings for 2002 were $67.1 million, or $1.27 and $1.26
per basic and diluted common share, respectively, before a non-
cash, after-tax charge of $27.6 million, or $0.52 per basic
share, related to NSTAR's investment in RCN that is further
discussed below.  For the same period in 2001, NSTAR reported a
loss of $97.5 million or $1.84 and $1.83 per basic and diluted
common share, respectively.  Results for 2001 were $76.4 million,
or $1.44 per basic and diluted common share, before a non-cash,
after-tax charge of $173.9 million recognized in March 2001, or
$3.28 per basic share, related to NSTAR's investment in RCN.

Absent the RCN charge in both years, the current period's
earnings declined by $9.3 million, or 12.2%, due to the impact of
the downturn in the economy on the region, particularly in the
commercial and industrial sectors, and unseasonably warm winter
weather conditions during 2002.  These negative factors
contributed significantly to a 3.4% decrease in retail kWh sales
and a 11.5% decrease in firm gas sales.  There were an average of
410 (12.1%) fewer heating degree days in NSTAR Gas' service
territory through June 30, 2002 as compared to the same period
last year.  In addition, operations and maintenance expense
increased $11.6 million that reflects higher pension-related
benefits costs ($8.3 million), higher costs relating
to the System Improvement Program (approximately $8.1 million
or $.09 cent reduction in earnings per share), and lower
available earnedmitigation incentive revenues of $4.3 million.
Positive factors during the current six-month period included
lower bad debt expense of $3.4 million, a $3.2 million
deferred tax benefit resulting from an adjustment to
NSTAR's tax valuation allowance, lower long and short-term
interest costs of $16.2 million, net of regulatory interest,
and a $2 million decrease in preferred dividends
as a result of the redemption of Boston Edison's
Cumulative Preferred Stock, 8% Series in December 2001.

Consistent with the performance of the telecommunications sector
as a whole, the market value of RCN's common shares continued to
decrease significantly.  On June 19, 2002, NSTAR received an
additional 7.5 million shares from the third and final exchange
of its investment in the RCN joint venture pursuant to an amended
Joint Venture Agreement.  The market value of RCN common shares
has continued to decline during 2002 and has not closed above
NSTAR's carrying value of $3.75 per share since November 27,
2001.  As a result, NSTAR recognized a $27.6 million write-down
of its total 11.6 million RCN shares to a market value of $1.37
per share as of June 30, 2002.  In the first quarter of 2001,
management had determined that this decline in market value was
"other-than-temporary" in accordance with the SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" and recorded a non-cash, after-tax charge of $173.9
million.

The results of operations for the six-month periods ended June
30, 2002 and 2001, exclusive of the RCN write-down, are not
indicative of the results that may be expected for the entire
year due to the seasonality of electric and gas sales and
revenues.  Refer to Note B of the accompanying Condensed
Consolidated Financial Statements.

Operating revenues
<TABLE>
<CAPTION>
Operating revenues for the first six months of 2002 decreased 17%
from the same period in 2001 as follows:
<S>                                              <C>
  (in thousands)
  Retail electric revenues                          $(162,885)
  Wholesale electric revenues                          (9,081)
  Gas sales revenues                                  (88,976)
  Other revenues                                      (12,843)
    Decrease in operating revenues                  $(273,785)
                                                     =========
</TABLE>
The decrease in operating revenues was significantly impacted by
the decline in standard offer and default service rates charged
to customers, below-normal temperatures during the winter period
as shown by the decline in heating degree days in the table below
and the downturn in the economy.

Retail electric revenues were $1,015.7 million in the first half
of 2002 compared to $1,178.6 million in the same period of 2001,
a decrease of $162.9 million, or 14%.  The change in retail
revenues is primarily due to significantly lower cost of
purchased power, a 3.4% decline in retail kWh sales and lower
rates implemented in January 2002 for standard offer and default
services adjusted for decreases in the cost of energy supply.
Components of the total decrease in retail revenues also includes
lower revenue related to demand-side management programs of $4.6
million due to the timing of program expenditures.  Transition
revenues increased by $6.4 million due to higher rates for
transition cost recovery and include a $7 million decline in
mitigation incentive revenues that were allowed for successfully
lowering transition charges.  Transmission revenues increased by
$8.4 million primarily as a result of rate increases.  The change
in NSTAR's retail revenues related to standard offer, default
services and demand-side management are reconciled to the costs
incurred.

The 3.4% decrease in retail kWh sales in the current six-month
period reflects declines in the residential (6.2%), commercial
(1.5%) and industrial (6.1%) sectors.  These declines were
impacted by weaker economic conditions as indicated by the lower
Boston hotel occupancy rate that was down 7.2% when compared to
2001 and by the Boston office vacancy rate that remains
comparably high.  The unemployment rate in Boston was
approximately 4% as of June 30, 2002 as compared to approximately
3% at the same time in 2001.  NSTAR Electric's sales to
residential and commercial customers were approximately 30% and
59%, respectively, of its total retail sales mix for the current
six-month period and provided 46% and 47% of distribution
revenue, respectively.  In 2002, the Boston hotel occupancy rate
was down 7.2% when compared to 2001.  The office vacancy rate
remains comparably high.  The unemployment rate in Boston was
approximately 4% during the first half of this year as compared
to approximately 3% in the same period in 2001.  Industrial
sector sales declined due primarily to a slowdown in economic
conditions that resulted from reduced production or facility
closings.  The industrial sector comprises approximately 9% of
NSTAR's energy sales and 5% of distribution revenue.

Weather conditions greatly impact the change in electric and, to
a larger extent, gas sales and revenues in NSTAR's service area.
The first quarter of 2002 was significantly warmer than the same
period in 2001 and was followed by slightly below normal
temperatures for the second quarter.  Below is comparative
information on heating and cooling degree days for the six-month
periods ending June 30, 2002 and 2001 and the number of degree
days in a "normal" first six-month period as represented by a 30-
year average.  A "degree-day" is a unit measuring how much the
outdoor mean temperature falls below (for heating) or rises above
(for cooling), a base of 65 degrees.  Each degree below or above
the base, is measured in one degree day.
<TABLE>
<CAPTION>
<S>                                       <C>            <C>       <C>
                                                                     Normal
                                                                    30-Year
                                             2002         2001      Average

Heating degree days                         3,375        3,785        3,782
  Percentage change from prior year         (10.8)%        2.6%
  Percentage change from 30-year average    (10.8)%          -%

Cooling degree days                           159          276          175
  Percentage change from prior year         (42.4)%        66.3%
  Percentage change from 30-year average     (9.1)%        57.7%
</TABLE>

The lower heating degree days experienced during the current six-
month period impacted gas energy sales more than electric energy
sales due to the decline in heating degree days from the same
period last year and the normal average days when heating would
have been in demand.  The 10.8% decrease in heating degree days
in 2002 significantly impacts earnings from gas operations due to
the relatively short winter period when there is potential
heating demand.

Wholesale electric revenues were $36.2 million in the first half
of 2002 compared to $45.2 million in the same period of 2001, a
decrease of $9 million, or 20%.  This decrease in wholesale
revenues reflects a 4% decrease in kWh sales due to the
expiration of two municipal power supply contracts on May 31,
2002 and a decline in rates.  Amounts collected from wholesale
customers are credited to retail customers through the transition
charge.  Therefore, the expiration of these contracts has no
impact on net income.

Gas sales revenues were $174.5 million in the first half of 2002
compared to $263.4 million in the same period of 2001, a decrease
of $88.9 million, or 34%.  The decrease in revenues is
attributable to a 48% decline in the cost of gas from suppliers
from the same period last year, a 11.5% decline in BBTU firm
sales due to the downturn in the economy and the warmer weather.
NSTAR Gas' firm sales to residential, commercial and industrial
customers were approximately 49%, 38% and 7%, respectively, of
total firm sales for the current six-month period.

Other revenues were $97.5 million in the first half of 2002
compared to $109.9 million in the same period of 2001, a decrease
of $12.4 million, or 11%.  This decrease primarily reflects lower
revenues from non-utility operations due to lower steam sales
that reflect warmer weather and the loss of a large customer and
lower fuel costs, partially offset by higher chilled water and
electric revenues due to rate increases.

Operating expenses

Purchased power costs were $631.2 million in the first half of
2002 compared to $793.3 million in the same period of 2001, a
decrease of $162.1 million, or 20%.  The decrease in expense
reflects lower purchased power requirements due to a 3.4%
decrease in retail sales, a 4% decrease in wholesale sales due to
the expiration of two power supply contracts and lower costs that
reflect the prices of natural gas and oil.  Included in the
current and prior period was $32.3 million and $71.1 million,
respectively, that reflects the recognition of previously
deferred standard offer and default service supply costs
resulting from the current period collection of these costs.
NSTAR adjusts its electric rates to collect the costs related to
energy supply from customers on a reconciling basis.  Due to the
rate adjustment mechanisms, changes in the amount of energy
supply expense is not expected to have an impact on earnings.
The cost of gas sold, representing NSTAR Gas' supply expense, was
$89.3 million for the first half of 2002 compared to $171.8
million in the same period of 2001, a decrease of $82.5 million,
or 48%, reflecting the lower cost of gas supply and the
significant reduction in sales due to milder weather conditions.
These expenses are also reconciled to the current level of
revenues collected.

Operations and maintenance expense was $214.9 million in the
first half of 2002 compared to $203.3 million in the same period
of 2001, an increase of $11.6 million, or 6%.  This increase
primarily reflects approximately $8.0 million incurred in
connection with improvements made to its electric delivery
system, an increase of $8.3 million in pension-related costs due
to a downturn in the equity markets and lower interest costs that
are expected to continue for the remainder of 2002, and a $2.5
million loss incurred that related to a settlement adjustment.
The higher pension costs are in line with NSTAR's forecast that
pension costs would increase by approximately $20 million for
2002 as compared to 2001.  This trend is anticipated to continue
through 2003, as a result of further declines in the equity
market.  These factors were somewhat offset by the absence of
$3.7 million in storm costs incurred in the first quarter of 2001
and a decline in bad debt expense of $3.4 million.

Depreciation and amortization expense was $117.5 million in the
first half of 2002 compared to $114.1 million in the same period
of 2001, an increase of $3.4 million, or 3%.  The increase
primarily reflects higher depreciable plant in service.

Demand side management (DSM) and renewable energy programs
expense was $31.9 million in the first half of 2002 compared to
$38.3 million in the same period of 2001, a decrease of $6.5
million, or 17%, primarily due to timing of DSM expense which is
consistent with the collection of conservation and renewable
energy revenues.  These costs are collected from customers on a
fully reconciling basis and as a result, fluctuations in program
costs have no impact on earnings.  In addition, NSTAR earns
incentive amounts in return for increased customer participation.

Property and other taxes were $51.2 million in the first half of
2002 compared to $49.6 million in the same period of 2001 an
increase of $1.6 million, or 3%.  This increase was due to higher
municipal property taxes, particularly for the City of Boston.
Payroll and other taxes remained level with last year.

Income taxes from operations were $41.6 million in the first half
of 2002 compared to $55.7 million in the same period of 2001, a
decrease of $14.1 million, or 25%, reflecting lower pre-tax
operating income.

Other income (deductions)

Absent the $27.6 million and $173.9 million write-downs of the
RCN investment in the six-month periods of 2002 and 2001,
respectively, that is discussed more fully below, other income
was $7.4 million in the first half of 2002 compared to income of
$0.9 million in the same period of 2001, a net increase in income
of $6.5 million.  The increase was due primarily to a deferred
tax valuation allowance reserve account adjustment for $3.2
million and the recognition of a gain of $3.9 million resulting
from the sale of equity securities in connection with the
demutualization of John Hancock and MetLife.  Partially
offsetting these gains was lower earnings from merchandising and
jobbing of heating products and the absence of $4.5 million gain
on the sale of securities that occurred in 2001.  Other income
also includes income from non-utility operations and includes the
sale of emissions allowances.

Interest charges

Interest on long-term debt and transition property securitization
certificates was $75.2 million in the first half of 2002 compared
to $80.5 million in the same period of 2001, a decrease of $5.3
million, or 7%.  The decrease in interest expense reflects the
retirement of $24.3 million in Boston Edison 9.375% Debentures in
August 2001, NSTAR Gas' 8.99% Bonds of $3.5 million in December
2001 and ComElectric's 9.3%, $30 million Term Loan in early
January 2002, additional sinking fund payments and the reduction
in transition property securitization certificates outstanding
that resulted in reduced interest expense of $2.1 million.

Short-term and other interest expense, excluding regulatory
interest expense, was $8.9 million in the first half of 2002
compared to $19.9 million in the same period of 2001, a decrease
of $10.9 million, or 55%.  This decrease was due to a significant
reduction in short-term borrowing rates despite a higher average
level of debt outstanding.  Effective short-term borrowing rates
averaged approximately 1.9% in the first six-months of 2002 as
compared to approximately 5.3% in the same period last year.  The
reduction in short-term and other interest costs was partially
offset by a $5.3 million increase in regulatory interest due to a
reduction in the under-collection of regulatory deferrals.

Allowance for borrowed funds used in construction (AFUDC)
decreased by $3.6 million, or 89%, due to the absence in the
current period of capitalized interest related to the
construction of an NSTAR office building and the impact of lower
AFUDC rates

Liquidity

NSTAR's short-term debt decreased by $80.9 million to $543.9
million at June 30, 2002 as compared to $624.8 million at
December 31, 2001.  The decrease resulted primarily from $352.5
million of cash flows provided by operating activities, offset by
$159.1 million of cash flows used in investing activities and
$123.6 million of cash flows used in financing activities
excluding the change in short-term debt.

Period to period fluctuations in the levels of net cash provided
by operating activities for the six-month periods ended June 30,
2002 and 2001 are not indicative of the results that may be
expected for an entire year.

The net cash provided by operating activities of $352.5 million
was partially attributable to net earnings of $40.5 million,
which, when adjusted for depreciation and amortization, deferred
income taxes and investment tax credits, provided $175.2 million
of operating cash.  The $17.3 million change in deferred income
taxes and investment tax credits primarily reflects the change in
regulatory deferrals year to year.  In addition, a recent change
in the tax laws allows for an additional 30% acceleration of tax
depreciation on current year additions, as well as, the impact of
accelerated depreciation on normal capital additions.  Also
contributing to operating cash was a decrease in receivables of
$192.4 million, which was partially offset by a decrease in
payables of $35.7 million.  Included in the decrease in
receivables was the receipt of $64 million associated with the
non-recurring construction financing of NSTAR's new corporate
office building.  In 2001, NSTAR was funding construction cash
requirements for this facility.  The net cash used in investing
activities of $159.1 million was utilized primarily for capital
expenditures used in transmission and distribution systems and
included $27 million expended on this facility.  The net cash
used in financing activities of $204.5 million was primarily the
result of repayments of short-term borrowings of $80.9 million,
long-term debt redemptions and sinking fund payments of $66.4
million and dividends paid of $57.2 million.

Net working capital, excluding short-term borrowings and the
current portion of long-term debt, increased by $191.4 million to
$188.2 million for the six months ended June 30, 2002 as compared
to a shortfall of $3.2 million for the same period in 2001.  This
increase is primarily due to the improved accounts receivable
collection activity, lower power supply payments to vendors and a
reduction in estimated tax payments in 2002 of approximately $100
million.  Refer to the recent change in tax laws noted above.  A
portion of this tax benefit is expected to turn around during the
second half of 2002 primarily as a result of changes in the level
of property tax payments.

The Company's primary estimated future uses of cash for 2002
include capital expenditures, dividend payments and debt
reductions.

The IRS is in the process of auditing the COM/Energy tax returns
for the years 1997, 1998 and 1999.  Before completion of the
audit, and before the end of 2002, it is expected that the IRS
National Office will provide a response to the request for a
Technical Advise.  Should NSTAR's position be overturned as a
result of the IRS decision, it is probable that NSTAR will make a
payment to the IRS of approximately $61 million in order to stop
the accrual of interest on the potential tax deficiency.  NSTAR
intends to vigorously defend its position, which is supported by
a substantial authority opinion provided by a management audit
firm, relative to this transaction and anticipates pursuing a
refund of the amount paid plus interest.  Refer to "Income Tax
Issues" in this MD&A for a further discussion.

NSTAR's internally generated funds consist of cash flows from
operating activities, adjusted to exclude changes in working
capital and the payment of dividends.  NSTAR companies supplement
internally generated funds as needed, primarily through the
issuance of short-term commercial paper and bank borrowings.

The capital spending level forecasted for 2002 is $315 million,
which includes approximately $271 million for electric and gas
operations and the balance for other capital requirements of non-
utility operations.  Also, included in this level of spending are
costs associated with NSTAR's System Improvement Program.  For
the six-month period ended June 30, 2002, capital spending was
$170.1 million including the System Improvement Program, $27
million made in connection with a new corporate office building,
customer growth projects incurred by NSTAR Gas and expenditures
in connection with a non-utility turbine project.  These capital
spending programs and the related estimates included in this
report are subject to revision due to changes in regulatory
requirements, changes in transmission and distribution system
requirements environmental standards, availability and cost of
capital, interest rates and other assumptions.  Other investments
in 2002 reflect $7.2 million of proceeds from the sale of equity
securities of John Hancock Financial Services, Inc. and MetLife,
Inc.  Management continuously reviews its capital expenditure and
financing programs.

In the six-month period ended June 30, 2002, debt financing
activities included the net pay-down of $80.9 million in short-
term debt, the retirement of $32.8 million in securitization
certificates, the retirement of ComElectric's 9.3%, $30 million
Term Loan in January and the retirement of Cambridge Electric's
7.75%, $2.1 million Series D Notes in June.  In the fiscal year
2001, financing activities included redemptions of securitization
certificates of $62 million, redemption of all 500,000 shares
outstanding of Boston Edison's Cumulative Preferred Stock, 8%
Series, at the mandatory redemption price of $100 per share,
Boston Edison's early redemption of $24.3 million 9.375%
debentures, and other scheduled sinking fund payments.  There
were no new long-term debt issuances in the six-month period
ended June 30, 2002 or in 2001.

NSTAR and Boston Edison have no covenant requirements under their
long-term debt arrangements.  ComElectric, Cambridge Electric and
NSTAR Gas have covenant requirements under their long-term debt
arrangements and were in compliance at June 30, 2002 and December
31, 2001.

NSTAR has a $450 million revolving credit agreement with a group
of banks effective through November 2002.  At June 30, 2002 and
December 31, 2001, there were no amounts outstanding under this
revolving credit agreement.  This arrangement serves as back-up
to NSTAR's $450 million commercial paper program that, at June
30, 2002 and December 31, 2001, had $302 million and $315.5
million outstanding, respectively.  NSTAR anticipates renewing
its revolving credit agreement under similar terms.

Boston Edison has approval from the FERC to issue up to $350
million of short-term debt until December 31, 2002.  On May 31,
2002, Boston Edison received FERC authorization to issue short-
term debt securities from time to time on or before December 31,
2004, with maturity dates no later than December 31, 2005, in
amounts such that the aggregate principal does not exceed $350
million at any one time.  Boston Edison has a $300 million
revolving credit agreement with a group of banks effective
through December 2002.  At June 30, 2002 and December 31, 2001,
there were no amounts outstanding under this revolving credit
agreement.  This arrangement serves as back-up to Boston Edison's
$300 million commercial paper program that, at June 30, 2002 and
December 31, 2001, had outstanding balances of $184 million and
$191.5 million, respectively.  Separately, Boston Edison,
effective in July 2001, has an additional $50 million line of
credit and had no amounts outstanding at June 30, 2002 or at
December 31, 2001.

Boston Edison has approval from the MDTE to issue from time to
time up to $500 million of long-term debt securities through
2002.  In connection with this, on February 20, 2001, Boston
Edison filed a registration statement on Form S-3 with the SEC,
using a shelf registration process, to issue up to $500 million
in debt securities.  The SEC declared the registration statement
effective on February 28, 2001.  When issued, Boston Edison will
use the proceeds to pay at maturity long-term debt and equity
securities, refinance short-term debt and for other corporate
purposes.  No issuance of debt securities was made during 2001 or
thus far in 2002 under this authorization.

On July 15, 2002, NSTAR subsidiary Boston Edison Company notified
the trustee of its 8.25% Series Debentures, due September 15,
2022, that the entire $60 million principal amount of these
debentures, and approximately a $2.3 million premium, will be
called for redemption on September 16, 2002.

In addition, ComElectric, Cambridge Electric and NSTAR Gas,
collectively, have $190 million available under several lines of
credit.  Approximately $57.9 million and $118 million was
outstanding under these lines of credit at June 30, 2002 and
December 31, 2001, respectively.  ComElectric, Cambridge Electric
and Canal have approval from FERC to issue short-term debt with
amounts ranging from $60 million to $100 million until November
30, 2002, June 28, 2002 and June 15, 2002, respectively.  On May
31, 2002, ComElectric and Cambridge Electric received FERC
authorization to issue short-term debt securities from time to
time on or before November 30, 2004 and June 28, 2004, with
maturity dates no later than November 30, 2005 and June 28, 2005,
respectively, in amounts such that the aggregate principal does
not exceed $125 million and $60 million, respectively, at any one
time.  NSTAR Gas is not required to seek approval from FERC to
issue short-term debt.

NSTAR's goal is to maintain a capital structure that preserves an
appropriate balance between debt and equity.  Management believes
its liquidity and capital resources are sufficient to meet its
current and projected requirements.

RCN Joint Venture and Investment Conversion

NSTAR Com participated in a telecommunications venture with RCN
Telecom Services, Inc. of Massachusetts, a subsidiary of RCN
Corporation (RCN).  NSTAR Com accounted for its equity investment
in the joint venture using the equity method of accounting.  As
part of the Joint Venture Agreement, NSTAR Com had the option to
exchange portions of its joint venture interest for common shares
of RCN at specified periods.

On April 6, 2000, NSTAR Com issued its third and final notice to
exchange substantially all of its remaining interest in the joint
venture into common shares of RCN.  Effective with the third
notice, NSTAR Com's profit and loss sharing ratio was reduced to
zero.

On October 18, 2000, NSTAR Com and RCN signed an agreement in
principle to amend the Joint Venture Agreement.  Although the
agreement was subject to ongoing negotiations, this proposal
established, among other items, the number of shares to be
received upon finalization of the agreement for the third
conversion of NSTAR Com's remaining equity investment at 7.5
million shares.

On June 19, 2002, NSTAR Com and RCN finalized negotiations on an
Amended Joint Venture Agreement and NSTAR Com received the
anticipated 7.5 million shares resulting from its final exchange
of its investment in the RCN joint venture.  With the receipt of
these shares, NSTAR Com holds approximately 11.6 million RCN
common shares, or approximately 10.6% of RCN's outstanding common
shares.  Prior to this final exchange, NSTAR Com had received
approximately 4.1 million shares of RCN resulting from the two
previous exchanges.

In accordance with its accounting policies, NSTAR Com
continuously evaluates the carrying value of its investment in
RCN.  Consistent with the performance of the telecommunications
sector as a whole, the market value of RCN's common shares
decreased significantly during the later part of 2000 and
continued to decrease in 2001.  As a result, in the first quarter
of 2001, management determined that this decline in market value
was "other-than-temporary" in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities."

NSTAR Com recognized an impairment of its entire investment in
RCN, in the first quarter of 2001.  This write-down resulted in a
non-cash, after-tax charge of $173.9 million that is reported on
the accompanying Condensed Consolidated Statements of Income as
"Write-down of RCN investment, net."

During 2002, the market value of RCN common shares continued to
decline and had not closed above NSTAR's carrying value of $3.75
per share since November 27, 2001.  As a result, NSTAR Com
recognized a write-down of its 11.6 million RCN common shares to
a market value of $1.37 per share as of June 30, 2002.  This
write-down resulted in a non-cash, after-tax charge of $27.6
million that is reported on the accompanying Condensed
Consolidated Statements of Income as "Write-down of RCN
investment, net."

The total carrying value of the 11.6 million RCN common shares is
included in Other investments on the accompanying Condensed
Consolidated Balance Sheets at their estimated fair value of
approximately $15.8 million at June 30, 2002.  The fair value of
the 11.6 million shares held may increase or decrease as a result
of changes in the market value of RCN common shares.  As of June
30, 2002 and December 31, 2001, the market value per share of RCN
was $1.37 and $2.93, respectively.  The unrealized gain or loss
associated with these shares will fluctuate due to the changes in
fair value of these securities during each period and is
reflected, net of associated income taxes, as a component of
Other comprehensive income, net on the accompanying Condensed
Consolidated Statements of Comprehensive Income (Loss).  The
cumulative increase or decrease in fair value of these shares as
of June 30, 2002 and includes of the impact of the write-down of
these shares and therefore, has not impacted Accumulated other
comprehensive income on the accompanying Condensed Consolidated
Balance Sheets.

Performance Assurances and Financial Guarantees

NSTAR Electric has entered into a series of purchased power
agreements to meet its default and standard offer service supply
obligations through December 31, 2002.  NSTAR Electric currently
is recovering payments it is making to suppliers from its
customers.  Most of the Company's power suppliers are
subsidiaries of larger companies with investment grade or better
credit ratings.  In many cases, NSTAR has financial assurances
and guarantees in place with the parent company of the supplier,
to minimize NSTAR Electric risk in the event the supplier
encounters financial difficulties or otherwise fails to perform.
In addition, under these agreements, in the event that the
supplier (or its parent guarantor) fails to maintain an
investment grade credit rating, it is subject to providing
additional security for performance.   NSTAR Electric's policy is
to enter into power supply arrangements only if the supplier (or
its parent guarantor) maintains an investment grade or better
credit rating.  In view of current turmoil in the energy supply
industry, NSTAR is unable to determine whether its suppliers (or
their parent guarantors) will become subject to financial
difficulties, or whether these financial assurances and
guarantees are sufficient.  In such event, the supplier (or its
guarantor) may not be in a position to provide the required
additional security, and NSTAR Electric may then terminate the
agreement.  Some of these agreements include a reciprocal
provision, where in the unlikely event that an NSTAR Electric
distribution company receives a credit rating below investment
grade, that company could be required to provide additional
security for performance, such as a letter of credit.

Other Investments

NSTAR has a remaining investment in John Hancock Financial
Services, Inc. (John Hancock) securities of approximately 73,400
shares that are currently available for sale and are included in
Other investments on the accompanying Condensed Consolidated
Balance Sheets.  During the quarter ended June 30, 2002, NSTAR
sold all its investment securities in MetLife, Inc. and
recognized a gain of $2.4 million resulting from the sale of
these equity securities.  The value of the Hancock common shares
was adjusted to reflect its market value as of June 30, 2002 and
December 31, 2001.  The unrealized gain or loss associated with
the remaining Hancock shares has fluctuated due to changes in
current market values and is reflected, net of applicable income
taxes, as a component of Comprehensive income (loss) on the
accompanying Condensed Consolidated Statements of Comprehensive
Income (Loss).  The cumulative increase or decrease in fair value
of these shares as of June 30, 2002 and December 31, 2001 is
reflected as a component of Accumulated other comprehensive
income (loss) on the accompanying Condensed Consolidated Balance
Sheets.  During the first half of 2002, NSTAR sold 75,000 shares
of Hancock and 141,432 shares of MetLife, Inc. for approximately
$2.8 million and $4.4 million, respectively, and recognized a
combined gain of approximately $3.9 million.  The remaining
approximately 73,400 John Hancock shares are expected to be sold
in the second half of 2002.


Part II - Other Information

Item 3.  Quantitative and Qualitative Disclosures about Market
Risk

There have been no material changes since year-end.

Item 4.  Submission of Matters to a Vote of Security Holders

None

Item 5.  Other Information

None

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Item 6.  Exhibits and Reports on Form 8-K
<S> <C> <C><C>         <C>    <C>
a)      Exhibits filed herewith and incorporated by reference:


          Exhibit 4     -  Instruments defining the rights of
                           security holders, including indentures

                           Management agrees to furnish to the
                           Securities and Exchange Commission, upon
                           request, a copy of any agreements or
                           instruments defining the rights of
                           holders of any long-term debt whose
                           authorization does not exceed 10% of
                           total assets.

          Exhibit 15   -   Letter re unaudited interim financial
                           information

                15.1   -   Letter of Independent Accountants

          Exhibit 99   -   Additional exhibits

                99.1   -   Report of Independent Accountants

                           Form S-8 Registration Statement filed by
                           NSTAR on April 30, 2002 (File No. 333-
                           87272); Post-effective Amendment to Form
                           S-4 on form S-3 filed by NSTAR on August
                           19, 1999 (File No. 333-78285); Post-
                           effective Amendment to form S-4 on Form
                           S-8 filed by NSTAR on August 19, 1999
                           (File No. 333-78285); Form S-8
                           Registration Statement filed by NSTAR on
                           August 19, 1999 (File No. 333-85559);
                           Form S-4 Registration Statement filed by
                           NSTAR on May 12, 1999 (File No. 333-
                           78285).

                99.2   -   Certification Statement of Chief
                           Executive Officer of NSTAR pursuant to
                           Section 906 of the Sarbanes-Oxley Act of
                           2002

                99.3   -   Certification Statement of Chief
                           Financial Officer of NSTAR pursuant to
                           Section 906 of the Sarbanes-Oxley Act of
                           2002.

b)      Form 8-K was filed on June 28, 2002 that reported on the
        NSTAR Board of Trustees election of William C. Van Faasen
        as a Trustee.

        Form 8-K was filed on July 25, 2002 that announced NSTAR's
        financial and operating results for the second quarter of
        2002, including the write-down of its RCN investment.

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                            Signature




Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.


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<S>                    <C>       <C>

                                              NSTAR
                                          (Registrant)



Date: August 14, 2002              /s/ R. J. WEAFER, JR
                                   Robert J. Weafer, Jr.
                                   Vice President, Controller
                                   and Chief Accounting Officer

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