1998 Annual Report

                The Connecticut Light and Power Company and Subsidiaries

                                       Index


Contents                                                          Page

Consolidated Balance Sheets...............................         2-3

Consolidated Statements of Income.........................          4

Consolidated Statements of Comprehensive Income...........          4

Consolidated Statements of Cash Flows.....................          5

Consolidated Statements of Common Stockholder's Equity....          6

Notes to Consolidated Financial Statements................          7

Report of Independent Public Accountants..................         40

Management's Discussion and Analysis of Financial
  Condition and Results of Operations.....................         41

Selected Financial Data...................................         53

Statements of Quarterly Financial Data (Unaudited)........         53

Statistics (Unaudited)....................................         54

Preferred Stockholder and Bondholder Information..........      Back Cover





                                   PART I.  FINANCIAL INFORMATION

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
At December 31,                                                  1998           1997

----------------------------------------------------------------------------------------
                                                                (Thousands of Dollars)
<S>                                                            <C>            <C>
ASSETS
------
Utility Plant, at original cost:
  Electric................................................  $  6,173,871   $  6,411,018

     Less: Accumulated provision for depreciation.........     2,758,012      2,902,673
                                                            -------------  -------------
                                                               3,415,859      3,508,345
  Construction work in progress...........................        83,477         93,692
  Nuclear fuel, net.......................................        87,867        135,076
                                                            -------------  -------------
      Total net utility plant.............................     3,587,203      3,737,113
                                                            -------------  -------------

Other Property and Investments:                             
  Nuclear decommissioning trusts, at market...............       452,755        369,162
  Investments in regional nuclear generating                
   companies, at equity...................................        56,999         58,061
  Other, at cost..........................................        93,864         66,615
                                                            -------------  -------------
                                                                 603,618        493,838
                                                            -------------  -------------
Current Assets:                                             
  Cash....................................................           434            459
  Investment in securitizable assets......................       160,253        205,625
  Notes receivable from affiliated companies..............         6,600           -
  Receivables, less accumulated provision for
   uncollectible accounts of $300,000 in 1998 and 1997....        22,186         50,671
  Accounts receivable from affiliated companies...........         1,721          3,150
  Taxes receivable........................................        26,478         70,311
  Fuel, materials and supplies, at average cost...........        71,982         81,878
  Recoverable energy costs, net--current portion..........          -            28,073
  Prepayments and other...................................       121,514         79,642
                                                            -------------  -------------
                                                                 411,168        519,809
                                                            -------------  -------------
Deferred Charges:                                           
  Regulatory assets (Note 1G).............................     1,415,838      1,292,818
  Unamortized debt expense................................        19,603         19,286
  Other...................................................        12,768         18,359
                                                            -------------  -------------
                                                               1,448,209      1,330,463
                                                            -------------  -------------







      Total Assets........................................  $  6,050,198   $  6,081,223
                                                            =============  =============

</TABLE>
See accompanying notes to consolidated financial statements.









THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
At December 31,                                                    1998           1997

------------------------------------------------------------------------------------------
                                                                  (Thousands of Dollars)
<S>                                                              <C>            <C>
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:                                               
  Common stock--$10 par value. Authorized                     
   24,500,000 shares; outstanding 12,222,930                  
   shares...................................................  $    122,229   $    122,229
  Capital surplus, paid in..................................       664,156        641,333
  Retained earnings.........................................       210,108        419,972
  Accumulated other comprehensive income....................           378           -   
                                                              -------------  -------------
           Total common stockholder's equity................       996,871      1,183,534
  Preferred stock not subject to mandatory                    
   redemption...............................................       116,200        116,200
  Preferred stock subject to mandatory redemption...........        99,539        151,250
  Long-term debt............................................     1,793,952      2,023,316
                                                              -------------  -------------
           Total capitalization.............................     3,006,562      3,474,300
                                                              -------------  -------------
Minority Interest in Consolidated Subsidiary................       100,000        100,000
                                                              -------------  -------------
Obligations Under Capital Leases............................        68,444         18,042
                                                              -------------  -------------
Current Liabilities:                                                        
  Notes payable to banks....................................        10,000         35,000
  Notes payable to affiliated companies.....................          -            61,300
  Long-term debt and preferred stock--current                               
   portion..................................................       233,755         23,761
  Obligations under capital leases--current                                 
   portion..................................................        94,440        140,076
  Accounts payable..........................................       121,040        124,427
  Accounts payable to affiliated companies..................        32,758         92,963
  Accrued taxes.............................................        19,396         33,017
  Accrued interest..........................................        31,409         14,650
  Other.....................................................        34,872         23,495
                                                              -------------  -------------
                                                                   577,670        548,689
                                                              -------------  -------------
Deferred Credits:                                             
  Accumulated deferred income taxes.........................     1,194,722      1,348,617
  Accumulated deferred investment tax credits...............       114,457        127,713
  Decommissioning obligation--Millstone 1 (Note 3)..........       560,500           -
  Deferred contractual obligations..........................       277,826        348,406
  Other.....................................................       150,017        115,456
                                                              -------------  -------------
                                                                 2,297,522      1,940,192
                                                              -------------  -------------

Commitments and Contingencies (Note 11)



           Total Capitalization and Liabilities.............  $  6,050,198   $  6,081,223
                                                              =============  =============
</TABLE>                                                                    
See accompanying notes to consolidated financial statements.






THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------
For the Years Ended December 31,                        1998        1997        1996

---------------------------------------------------------------------------------------
                                                           (Thousands of Dollars)

<S>                                                  <C>         <C>         <C>
Operating Revenues................................. $2,386,864  $2,465,587  $2,397,460
                                                    ----------- ----------- -----------
Operating Expenses:                                 
  Operation --                                      
     Fuel, purchased and net interchange power.....    887,224     977,543     831,079
     Other.........................................    703,971     726,420     727,674
  Maintenance......................................    271,317     355,772     300,005
  Depreciation.....................................    216,509     238,667     247,109
  Amortization of regulatory assets, net...........    120,884      61,648      57,432
  Federal and state income taxes...................    (11,642)    (59,436)        957
  Taxes other than income taxes....................    170,347     172,592     174,062
                                                    ----------- ----------- -----------
        Total operating expenses...................  2,358,610   2,473,206   2,338,318
                                                    ----------- ----------- -----------
Operating Income/(Loss)............................     28,254      (7,619)     59,142
                                                    ----------- ----------- -----------
                                                    
Other Income:                                       
  Equity in earnings of regional nuclear            
    generating companies...........................      6,241       5,672       6,619
  Millstone 1--unrecoverable costs (Note 1K).......   (143,239)       -           -
  Other, net.......................................     (6,075)     (1,856)     20,710
  Minority interest in income of subsidiary........     (9,300)     (9,300)     (9,300)
  Income taxes.....................................     67,127       7,573         160
                                                    ----------- ----------- -----------
        Other (loss)/income, net...................    (85,246)      2,089      18,189
                                                    ----------- ----------- -----------
        (Loss)/income before interest charges......    (56,992)     (5,530)     77,331
                                                    ----------- ----------- -----------

Interest Charges:                                   
  Interest on long-term debt.......................    133,192     132,127     127,198
  Other interest...................................      5,541       1,940       1,001
                                                    ----------- ----------- -----------
        Interest charges, net......................    138,733     134,067     128,199
                                                    ----------- ----------- -----------

Net Loss........................................... $ (195,725) $ (139,597) $  (50,868)
                                                    =========== =========== ===========

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Net Loss........................................... $ (195,725) $ (139,597) $  (50,868)
                                                    ----------- ----------- -----------
Other comprehensive income, net of tax (Note 15):
Unrealized gains on securities.....................        638        -           -   
Minimum pension liability adjustments..............       (260)       -           -   
                                                    ----------- ----------- -----------
  Other comprehensive income, net of tax...........        378        -           -   
                                                    ----------- ----------- -----------
Comprehensive Loss                                  $ (195,347) $ (139,597) $  (50,868)
                                                     ========== =========== ===========



</TABLE>
See accompanying notes to consolidated financial statements.





THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
For the Years Ended December 31,                                   1998       1997       1996
-----------------------------------------------------------------------------------------------
                                                                      (Thousands of Dollars)
<S>                                                             <C>        <C>        <C>
Operating Activities:                                            
  Net loss.................................................... $(195,725) $(139,597) $ (50,868)
  Adjustments to reconcile to net cash                                      
   from operating activities:
    Depreciation..............................................   216,509    238,667    247,109
    Deferred income taxes and investment tax credits, net.....   (65,689)   (10,401)   (39,642)
    Amortization of deferred demand-side-management costs, net    42,085     38,029     26,941
    Amortization/(deferral) of recoverable energy costs.......    30,745     (9,533)   (35,567)
    Amortization of cogeneration deferral.....................    29,559     37,338     19,221
    Amortization of regulatory asset - income taxes...........    66,027     13,927     19,349
    Amortization of other regulatory asset ...................    25,298     10,383     18,862
    Deferred nuclear refueling outage, net of amortization ...         -    (45,333)    45,643
    Millstone 1--unrecoverable costs..........................   143,239        -          -
    Other sources of cash.....................................    82,109     35,065     51,823
    Other uses of cash........................................   (23,561)   (50,417)   (23,862)
  Changes in working capital:                                  
    Receivables and accrued utility revenues..................    (5,086)   184,223    (22,378)
    Fuel, materials and supplies..............................     9,896     (1,941)   (11,455)
    Accounts payable..........................................   (63,592)   (22,036)    83,951
    Accrued taxes.............................................   (13,621)     4,310    (23,561)
    Sale of receivables and accrued utility revenues..........    35,000     70,000        -
    Investment in securitizable assets........................    45,372   (205,625)       -
    Other working capital (excludes cash).....................    30,097    (74,266)    (5,385)
                                                               ---------- ---------- ----------
Net cash flows from operating activities......................   388,662     72,793    300,181
                                                               ---------- ---------- ----------


Financing Activities:
  Issuance of long-term debt..................................       -      200,000    222,000
  Net (decrease)/increase in short-term debt..................   (86,300)    96,300    (51,750)
  Reacquisitions and retirements of long-term debt............   (45,006)  (204,116)   (14,329)
  Reacquisitions and retirements of preferred stock...........   (35,711)       -          -
  Cash dividends on preferred stock...........................   (14,139)   (15,221)   (15,221)
  Cash dividends on common stock..............................         -     (5,989)  (138,608)
                                                               ---------- ---------- ----------
Net cash flows (used for)/from financing activities...........  (181,156)    70,974      2,092
                                                               ---------- ---------- ----------
Investment Activities:                                         
  Investment in plant:                                         
    Electric utility plant....................................  (132,194)  (155,550)  (140,086)
    Nuclear fuel..............................................    (8,444)      (702)       553
                                                               ---------- ---------- ----------
      Net cash flows used for investments in plant............  (140,638)  (156,252)  (139,533)
  Investment in NU system Money Pool..........................    (6,600)   109,050   (109,050)
  Investment in nuclear decommissioning trusts................   (54,106)   (45,314)   (50,998)
  Other investment activities, net............................   (26,187)   (51,196)    (2,625)
  Capital contributions from Northeast Utilities..............    20,000        -          -
                                                               ---------- ---------- ----------
Net cash flows used for investments...........................  (207,531)  (143,712)  (302,206)
                                                               ---------- ---------- ----------
Net (Decrease)/Increase In Cash For The Period................       (25)        55         67
Cash - beginning of period....................................       459        404        337
                                                               ---------- ---------- ----------
Cash - end of period.......................................... $     434  $     459  $     404
                                                               ========== ========== ==========
                                                               
Supplemental Cash Flow Information:
Cash paid/(refunded) during the year for:                      
  Interest, net of amounts capitalized........................ $ 110,119  $ 145,962  $ 114,458
                                                               ========== ========== ==========
  Income taxes................................................ $ (46,747) $ (22,338) $  77,790
                                                               ========== ========== ==========
Increase in obligations:                                       
  Niantic Bay Fuel Trust and other capital leases............. $   4,102  $   2,815  $   2,855
                                                               ========== ========== ==========

</TABLE>                                                       
See accompanying notes to consolidated financial statements.







THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
                                                                           Accumulated
                                                   Capital    Retained        Other
                                         Common    Surplus,   Earnings    Comprehensive
                                         Stock     Paid In       (a)         Income         Total
----------------------------------------------------------------------------------------------------
                                                       (Thousands of Dollars)


<S>                                     <C>        <C>        <C>                  <C>    <C>
Balance at January 1, 1996..........   $122,229   $637,981   $ 785,476   $         -     $1,545,686

    Net loss........................                           (50,868)                     (50,868)
    Cash dividends on preferred     
      stock.........................                           (15,221)                     (15,221)
    Cash dividends..................                          (138,608)                    (138,608)
    Capital stock expenses, net.....                 1,676                                    1,676
                                       ---------  ---------  ----------  --------------  -----------
Balance at December 31, 1996........    122,229    639,657     580,779             -      1,342,665

    Net loss........................                          (139,597)                    (139,597)
    Cash dividends on preferred     
      stock.........................                           (15,221)                     (15,221)
    Cash dividends..................                            (5,989)                      (5,989)
    Capital stock expenses, net.....                 1,676                                    1,676
                                       ---------  ---------  ----------  --------------  -----------
Balance at December 31, 1997........    122,229    641,333     419,972             -      1,183,534

    Net loss........................                          (195,725)                    (195,725)
    Cash dividends..................                           (14,139)                     (14,139)
    Capital stock expenses, net.....                 2,764                                    2,764
    Capital contribution from       
      Northeast Utilities...........                20,000                                   20,000
    Gain on repurchase of preferred 
      stock.........................                    59                                       59
    Other comprehensive income......                                               378          378
                                       ---------  ---------  ----------  --------------  -----------
Balance at December 31, 1998........   $122,229   $664,156   $ 210,108   $         378   $  996,871
                                       =========  =========  ==========  ==============  ===========


</TABLE>


(a) The company has dividend restrictions imposed by its long-term debt
    agreements.  At December 31, 1998, these restrictions totaled approximately
    $540 million.


See accompanying notes to consolidated financial statements.




1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    A. About The Connecticut Light and Power Company
       The Connecticut Light and Power Company (the company or CL&P) and
       subsidiaries, Western Massachusetts Electric Company (WMECO), Holyoke
       Water Power Company (HWP), Public Service Company of New Hampshire
       (PSNH) and North Atlantic Energy Corporation (NAEC) are the operating
       subsidiaries comprising the Northeast Utilities system (the NU system)
       and are wholly owned by Northeast Utilities (NU).

       The NU system furnishes franchised retail electric service in
       Connecticut, New Hampshire and western Massachusetts through CL&P,
       PSNH and WMECO.  NAEC sells all of its entitlement to the capacity
       and output of the Seabrook nuclear power plant (Seabrook 1 or
       Seabrook) to PSNH under two life-of-unit, full cost recovery
       contracts. HWP also is engaged in the production and distribution of
       electric power.  The NU system also furnishes firm and other
       wholesale electric services to various municipalities and other
       utilities, and participates in limited retail access programs,
       providing off-system retail electric service.  The NU system serves
       in excess of 30 percent of New England's electric needs and is one of
       the 24 largest electric utility systems in the country as measured by
       revenues.

       NU is registered with the Securities and Exchange Commission (SEC) as
       a holding company under the Public Utility Holding Company Act of
       1935 (1935 Act).  NU and its subsidiaries, including CL&P, are
       subject to the provisions of the 1935 Act.  Arrangements among the NU
       system companies, outside agencies and other utilities covering
       interconnections, interchange of electric power and sales of utility
       property are subject to regulation by the Federal Energy Regulatory
       Commission (FERC) and/or the SEC.  CL&P is subject to further
       regulation for rates, accounting and other matters by the FERC and/or
       applicable state regulatory commissions.

       Other wholly owned subsidiaries of NU provide support services for
       the NU system companies and, in some cases, for other New England
       utilities.  Northeast Utilities Service Company (NUSCO) provides
       centralized accounting, administrative, information resources,
       engineering, financial, legal, operational, planning, purchasing and
       other services to the NU system companies. Northeast Nuclear Energy
       Company (NNECO) acts as agent for the NU system companies and other
       New England utilities in operating the Millstone nuclear generating
       facilities. North Atlantic Energy Service Corporation (NAESCO) has
       operational responsibilities for Seabrook. In addition, CL&P and
       WMECO each have established a special purpose subsidiary whose
       business consists of the purchase and resale of receivables.

       During the first quarter of 1999, NU established three new
       subsidiaries: NU Enterprises, Inc., Northeast Generation Company and
       Northeast Generation Services Company.  Directly or through multiple
       subsidiaries, these entities will engage in a variety of energy-
       related activities, including the acquisition and management of non-
       nuclear generating plants.

    B. Presentation
       The consolidated financial statements of CL&P include the accounts of
       all wholly owned subsidiaries. Significant intercompany transactions
       have been eliminated in consolidation.

       The preparation of financial statements in conformity with generally
       accepted accounting principles requires management to make estimates
       and assumptions that affect the reported amounts of assets and
       liabilities and disclosure of contingent 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 those estimates.

       Certain reclassifications of prior years' data have been made to
       conform with the current year's presentation.

       All transactions among affiliated companies are on a recovery of cost
       basis which may include amounts representing a return on equity and
       are subject to approval by various federal and state regulatory
       agencies.

    C. New Accounting Standards
       The Financial Accounting Standards Board (FASB) issued two new
       accounting standards during 1998:  Statement of Financial Accounting
       Standards (SFAS) 132, "Employers' Disclosures About Pensions and
       Other Postretirement Benefits," and SFAS 133, "Accounting for
       Derivative Instruments and Hedging Activities."

       SFAS 132 revises employers' disclosures about pension and other
       postretirement benefit plans, but it does not change the measurement
       or recognition of those plans.  See Note 9, "Pension Benefits
       and Postretirement Benefits Other Than Pensions," for further
       information on CL&P's pension and postretirement benefits
       disclosures.

       SFAS 133 establishes accounting and reporting standards for
       derivative instruments and hedging activities.  This statement
       becomes effective for CL&P on January 1, 2000, and will require
       derivative instruments used by CL&P to be recognized on the balance
       sheets as assets or liabilities at fair value.  CL&P uses derivative
       instruments for hedging purposes. The accounting for these hedging
       instruments will depend on which hedging classification each
       derivative instrument falls under, as defined by SFAS 133, offset
       by any changes in the market value of the hedged item.  Based on the
       derivative instruments which currently are being utilized by CL&P to
       hedge some of its fuel price risks, there will be an impact on
       earnings upon adoption of SFAS 133 which management cannot estimate
       at this time. For further information see Note 12, "Fuel-Price Risk-
       Management."

       During June 1997, the FASB issued SFAS 131, "Disclosures about
       Segments of an Enterprise and Related Information."  SFAS 131
       determines the standards for reporting and disclosing qualitative and
       quantitative information about a company's operating segments. More
       specifically, it requires financial information to be disclosed for
       segments whose operating results are received by the chief operating
       officer for decisions on resource allocation.  It also requires
       related disclosures about products and services, geographic areas and
       major customers. CL&P currently evaluates management performance
       using a cost-based budget and the information required by SFAS 131 is
       not available.

       As a result of the changes the NU system and the industry are
       undergoing, the company will implement business segment reporting in
       1999.  This reporting will provide management with revenue and
       expense information at the business segment level.  Management has
       identified significant segments to include transmission,
       distribution, generation-related and energy marketing.

    D. Investments and Jointly Owned Electric Utility Plant
       Regional Nuclear Generating Companies:  CL&P owns common stock of
       four regional nuclear generating companies (Yankee companies) which
       are accounted for on the equity basis due to CL&P's ability to
       exercise significant influence over their operating and financial
       policies.  CL&P's equity investments and ownership interests in the
       Yankee companies at December 31, 1998 are:

       (Thousands of Dollars, Except for Percentages)

       Connecticut Yankee Atomic 
         Power Company (CYAPC).............   $36,254       34.5%
       Yankee Atomic Electric 
         Company (YAEC)....................     4,882       24.5
       Maine Yankee Atomic Power 
         Company (MYAPC)...................    10,400       12.0
       Vermont Yankee Nuclear 
         Power Corporation (VYNPC).........     5,463        9.5
       Total Equity Investment.............   $56,999

       Each Yankee company owns a single nuclear generating unit. YAEC's,
       CYAPC's and MYAPC's nuclear power plants were shut down permanently
       on February 26, 1992, December 4, 1996, and August 6, 1997,
       respectively.  For additional information on the Yankee companies,
       see Note 3, "Nuclear Decommissioning and Plant Closure Costs."

       Millstone:  CL&P has an 81 percent joint ownership in both
       Millstone 1, a 660-megawatt (MW) nuclear generating unit and
       Millstone 2, a 870-MW nuclear generating unit. CL&P has a 52.93
       percent joint-ownership interest in Millstone 3, a 1,154-MW nuclear
       generating unit. During the third quarter of 1998, management
       decided to retire Millstone 1 and prepare for final decommissioning.
       For further information on the Millstone 1 closure, see Note 3,
       "Nuclear Decommissioning and Plant Closure Costs," and Management's
       Discussion and Analysis of Financial Condition and Results of
       Operations (MD&A). For further information on Millstone 2 and 3, see
       Note 3, "Nuclear Decommissioning and Plant Closure Costs," Note 11C,
       "Commitments and Contingencies - Nuclear Performance," and the MD&A.

       Seabrook 1: CL&P has a 4.06 percent joint ownership interest in
       Seabrook 1, a 1,148-MW nuclear generating unit.

       Plant-in-service and the accumulated provision for depreciation for
       CL&P's share of the three Millstone units and Seabrook are as
       follows:

                                                            At December 31,
       (Millions of Dollars)                             1998            1997

       Plant-in-service
       Millstone 1..................................  $     -         $  387.7
       Millstone 2..................................     759.3           694.7
       Millstone 3..................................   1,909.4         1,906.9
       Seabrook 1...................................     174.3           174.3
       Accumulated provision for depreciation
       Millstone 1..................................  $     -         $  172.0
       Millstone 2..................................     309.2           249.1
       Millstone 3..................................     609.3           552.7
       Seabrook 1...................................      39.3            33.9

       CL&P's share of Millstone and Seabrook 1 expenses are included in
       operating expenses on the accompanying Consolidated Statements of
       Income.

    E. Depreciation
       The provision for depreciation is calculated using the straight-line
       method based on estimated remaining lives of depreciable utility
       plant-in-service, adjusted for salvage value and removal costs, as
       approved by the appropriate regulatory agency.

       Except for major facilities, depreciation rates are applied to the
       average plant-in-service during the period. Major facilities are
       depreciated from the time they are placed in service.  When plant is
       retired from service, the original cost of plant, including costs of
       removal, less salvage, is charged to the accumulated provision for
       depreciation.  The costs of closure and removal of non-nuclear
       facilities are accrued over the life of the plant as a component of
       depreciation.  The depreciation rates for the several classes of
       electric plant-in-service are equivalent to a composite rate of 3.2
       percent in 1998 and 3.8 percent in 1997 and 4.0 percent in 1996. See
       Note 3, "Nuclear Decommissioning and Plant Closure Costs," for
       information on nuclear decommissioning.

       At December 31, 1998 and 1997, the accumulated provision for
       depreciation included approximately $47.9 million and $45.8 million,
       respectively, accrued for the cost of removal, net of salvage value
       for non-nuclear generation property.

    F. Revenues
       Other than revenues under fixed-rate agreements negotiated with
       certain wholesale, commercial and industrial customers and limited
       retail access programs, utility revenues are based on authorized
       rates applied to each customer's use of electricity. In general,
       rates can be changed only through a formal proceeding before the
       appropriate regulatory commission. Regulatory commissions also have
       authority over the terms and conditions of nontraditional rate making
       arrangements.  At the end of each accounting period, CL&P accrues an
       estimate for the amount of energy delivered but unbilled.

    G. Regulatory Accounting and Assets
       The accounting policies of CL&P and the accompanying consolidated
       financial statements conform to generally accepted accounting
       principles applicable to rate-regulated enterprises and reflect the
       effects of the ratemaking process in accordance with SFAS 71,
       "Accounting for the Effects of Certain Types of Regulation." Assuming
       a cost-of-service based regulatory structure, regulators may permit
       incurred costs, normally treated as expenses, to be deferred and
       recovered through future revenues.  Through their actions, regulators
       may also reduce or eliminate the value of an asset, or create a
       liability.  If CL&P was no longer subject to the provisions of SFAS
       71, CL&P would be required to write off all of its related regulatory
       assets and liabilities unless there is a formal transition plan which
       provides for the recovery, through established rates, for the
       collection of these costs through a portion of the business which
       would remain regulated on a cost-of-service basis.  At the time of
       transition, CL&P also would be required to determine any impairment
       of the carrying costs of deregulated plant and inventory assets.

       A restructuring program is being implemented within CL&P's
       jurisdiction, however, management continues to believe the
       application of SFAS 71 remains appropriate at this time.  Once CL&P's
       restructuring plan has been formally approved by the appropriate
       regulatory agency and management can determine the impacts of
       restructuring, CL&P's generation business will no longer be rate
       regulated on a cost-of-service basis.  The majority of CL&P's
       regulatory assets are related to its respective generation business.
       Management expects that CL&P's transmission and distribution business
       will continue to be rate-regulated on a cost-of-service basis and
       restructuring plans will allow for the recovery of regulatory assets
       through this portion of the business.

       For further information on CL&P's regulatory environment and the
       potential impacts of restructuring, see Note 11A, "Commitments and
       Contingencies - Restructuring," and the MD&A.

       Based on a current evaluation of the various factors and conditions
       that are expected to impact future cost recovery, management
       continues to believe it is probable that CL&P will recover its
       investments in long-lived assets, including regulatory assets.



       The components of CL&P's regulatory assets are as follows:

       At December 31,                                   1998            1997 
                                                        (Thousands of Dollars)

       Income taxes, net (Note 1H)................   $  538,521      $  709,896
       Recoverable energy costs, 
         net (Note 1I)............................      102,124         104,796
       Deferred demand-side management 
         costs....................................       10,014          52,100
       Cogeneration costs.........................        5,779          33,505
       Unrecovered contractual 
         obligations (Note 1J)....................      266,992         338,406
       Millstone 1 (Note 1K)......................      442,669            -   
       Other......................................       49,739          54,115

                                                     $1,415,838      $1,292,818

    H. Income Taxes
       The tax effect of temporary differences (differences between the
       periods in which transactions affect income in the financial
       statements and the periods in which they affect the determination of
       taxable income) is accounted for in accordance with the ratemaking
       treatment of the applicable regulatory commissions. See Note 8,
       "Income Tax Expense" for the components of income tax expense.

       The tax effect of temporary differences, including timing differences
       accrued under previously approved accounting standards, which give
       rise to the accumulated deferred tax obligation is as follows:


       At December 31,                                   1998            1997
                                                        (Thousands of Dollars)

       Accelerated depreciation and other
         plant-related differences................   $1,002,725      $1,056,690

       Regulatory assets - income tax
         gross up.................................      279,823         304,276

       Net operating loss carryforwards...........       (7,777)         (7,670)

       Other......................................      (80,049)         (4,679)

                                                     $1,194,722       $1,348,617

       At December 31, 1998, CL&P had a state of Connecticut net operating
       loss carryforward of approximately $149 million which can be used
       against CL&P and its affiliates' combined Connecticut taxable income
       and which if unused, expires in the year 2002.

    I. Recoverable Energy Costs
       Under the Energy Policy Act of 1992 (Energy Act), CL&P is assessed
       for its proportionate share of the costs of decontaminating and
       decommissioning uranium enrichment plants owned by the United States
       Department of Energy (D&D assessment).  The Energy Act requires that
       regulators treat D&D assessments as a reasonable and necessary
       current cost of fuel, to be fully recovered in rates like any other
       fuel cost.  CL&P is currently recovering these costs through rates.
       As of December 31, 1998, CL&P's total D&D deferrals were approximately
       $44.9 million.

       CL&P has in place an energy adjustment clause under which fuel prices
       above or below base-rate levels are charged or credited to customers.
       At December 31, 1998, recoverable energy costs included $78.1 million
       of costs previously deferred.

    J. Unrecovered Contractual Obligations
       Under the terms of contracts with MYAPC, CYAPC and YAEC, the
       shareholder-sponsor companies, including CL&P, PSNH and WMECO, are
       responsible for their proportionate share of the remaining costs of
       the units, including decommissioning.  As management expects that the
       NU system companies will be allowed to recover these costs from their
       customers, the NU system companies have recorded regulatory assets,
       with corresponding obligations, on their respective balance sheets.
       For further information, see Note 3, "Nuclear Decommissioning and
       Plant Closure Costs."

    K. Millstone 1
       The Millstone 1 regulatory asset includes the recoverable portion of
       the undepreciated plant and related balances of approximately $129.5
       million, and the regulatory asset associated with the decommissioning
       and closure obligation of $313.5 million.  See Note 3, "Nuclear
       Decommissioning and Plant Closure Costs," for further information.

    L. Market Risk-Management Policies
       CL&P utilizes swap instruments to hedge well-defined risks associated
       with changes in fuel prices. To qualify for hedge treatment, the
       underlying hedged item must expose CL&P to risks associated with
       market fluctuations and the market-risk management instrument used
       must be designated as a hedge and must reduce the company's exposure
       to market fluctuations throughout the period.

       Amounts receivable or payable under fuel-price management instruments
       are recognized in operating expenses when realized. For further
       information, see Note 12, "Fuel-Price Risk- Management."

2.  LEASES

    CL&P finances its nuclear fuel for Millstone 2 and its respective share
    of the nuclear fuel for Millstone 3 under the Niantic Bay Fuel Trust
    (NBFT) capital lease agreement.  This lease agreement has an expiration
    date of June 1, 2040.  On June 5, 1998, the NBFT issued $180 million
    Series G intermediate term notes (ITNs) through a private placement
    offering.  The five-year notes mature June 5, 2003 and will bear
    interest at a rate of 8.59 percent per annum, payable semiannually.
    At December 31, 1998, CL&P's capital lease obligation to the NBFT was
    approximately $144.8 million.

    The permanent shutdown of Millstone 1 in July 1998 afforded the NBFT ITN
    holders the right to seek repurchase of a pro rata share of their notes
    based upon the stipulated loss value of Millstone 1 fuel compared to the
    stipulated loss value of all fuel then under the NBFT, approximately
    $80 million.  The shutdown also obligates CL&P to pay such amount to
    the NBFT under the NBFT lease whether or not any ITN holders request
    repurchase.  CL&P is seeking consents from the ITN holders to amend this
    lease provision so that they will not be obligated to make this payment,
    but instead will issue an additional $80 million of collateral first
    mortgage bonds in mid-1999.

    CL&P makes quarterly lease payments for the cost of nuclear fuel
    consumed in the reactors based on a units-of-production method at rates
    which reflect estimated kilowatt-hours of energy provided plus financing
    costs associated with the fuel in the reactors.  Upon permanent
    discharge from the reactors, ownership of the nuclear fuel transfers to
    CL&P.  CL&P also has entered into lease agreements, some of which are
    capital leases, for the use of data processing and office equipment,
    vehicles, gas turbines, nuclear control room simulators and office
    space.  The provisions of these lease agreements generally provide for
    renewal options.

    The following rental payments have been charged to expense:

       Year                  Capital Leases    Operating Leases

       1998................    $20,494,000        $17,914,000
       1997................     10,457,000         19,749,000
       1996................     17,993,000         22,032,000
   
    Interest included in capital lease rental payments was $14,083,000 in
    1998, $9,948,000 in 1997 and $10,144,000 in 1996.



    Future minimum rental payments, excluding executory costs such as
    property taxes, state use taxes, insurance and maintenance, under long-
    term noncancelable leases as of December 31, 1998, are:

       Year                  Capital Leases    Operating Leases
                                  (Thousands of Dollars)

       1999................    $  2,900           $22,700
       2000................       2,900            21,200
       2001................       2,900            15,600
       2002................       3,000             6,700
       2003................       3,000             4,200
       After 2003..........      46,200            11,500 

       Future minimum lease
         payments..........      60,900           $80,900

       Less amount
         representing
         interest..........      42,859


       Present value of
         future minimum
         lease payments....      18,041

       Present value of
         future nuclear
         fuel lease
         payments..........     144,843


       Present value of
         future minimum
         lease payments....    $162,884
        


3.  NUCLEAR DECOMMISSIONING AND PLANT CLOSURE COSTS

    Millstone 2 and 3 and Seabrook 1:  CL&P's operating nuclear power
    plants have service lives that are expected to end during the years
    2015 through 2026. Upon retirement, these units must be decommissioned.
    Current decommissioning studies concluded that complete and immediate
    dismantlement at retirement continues to be the most viable and economic
    method of decommissioning the units. Decommissioning studies are
    reviewed and updated periodically to reflect changes in decommissioning
    requirements, costs, technology and inflation.

    The estimated cost of decommissioning CL&P's ownership share of
    Millstone 2, in year-end 1998 dollars, is $322.0 million. CL&P's
    ownership share of the estimated cost of decommissioning Millstone 3
    and Seabrook 1 in year-end 1998 dollars, is $296.2 million and $19.9
    million, respectively. Millstone 2 and 3 and Seabrook 1 decommissioning
    costs will be increased annually by their respective escalation rates.
    Nuclear decommissioning costs are accrued over the expected service
    lives of the units and are included in depreciation expense on the
    Consolidated Statements of Income. Nuclear decommissioning costs for
    these units amounted to $19.1 million in 1998 and $20.0 million each
    year in 1997 and 1996.  Nuclear decommissioning, as a cost of removal,
    is included in the accumulated provision for depreciation on the
    Consolidated Balance Sheets.  At December 31, 1998 and 1997, the
    decommissioning balance in the accumulated reserve for depreciation
    amounted to $165.6 million and $146.5 million, respectively.

    CL&P has established external decommissioning trusts for its portion of
    the costs of decommissioning Millstone 2 and 3.  Payments for CL&P's
    portion of the cost of decommissioning Seabrook 1 are paid to an
    independent decommissioning financing fund managed by the state of New
    Hampshire.  Funding of the estimated decommissioning costs assumes
    levelized collections for the Millstone units and escalated collections
    for Seabrook 1 and after-tax earnings on the Millstone and Seabrook
    decommissioning funds of approximately 5.5 percent and 6.5 percent,
    respectively.

    As of December 31, 1998, CL&P collected a total of $162.2 million
    through rates toward the future decommissioning costs of its share of
    Millstone 2 and 3, of which $142.8 million has been transferred to
    external decommissioning trusts.  As of December 31, 1998, CL&P paid
    approximately $3.0 million into Seabrook 1's external decommissioning
    financing fund.  Earnings on the decommissioning trusts and financing
    fund increase the decommissioning trust balance and the accumulated
    reserve for depreciation.  Unrealized gains and losses associated with
    the decommissioning trusts and financing fund also impact the balance of
    the trusts and the accumulated reserve for depreciation.  The fair value
    of the units in the external decommissioning trusts was $242.2 million
    at December 31, 1998.

    Changes in requirements or technology, the timing of funding or
    dismantling or adoption of a decommissioning method other than immediate
    dismantlement would change decommissioning cost estimates and the
    amounts required to be recovered.  CL&P attempts to recover sufficient
    amounts through its allowed rates to cover its expected decommissioning
    costs.  Only the portion of currently estimated total decommissioning
    costs that have been accepted by regulatory agencies is reflected in
    CL&P's rates. Based on present estimates and assuming its nuclear units
    operate to the end of their respective license periods, CL&P expects
    that the decommissioning trusts and financing fund will be substantially
    funded when the units are retired from service.

    Millstone 1: CL&P's share of the total estimated decommissioning costs
    for Millstone 1, which have been updated to reflect the early shutdown
    of the unit, are approximately $560.5 million as of December 31, 1998.
    The company has recorded the decommissioning  and closure obligation as
    a liability.  Nuclear decommissioning costs for Millstone 1 were $17.3
    million in 1998, $17.7 million in 1997 and $17.8 million in 1996.

    In February 1999, the DPUC issued a decision on CL&P's rate case filing.
    The decision allowed for recovery over a three-year period, without a
    return, of $126.0 million of  CL&P's remaining investment in Millstone 1.
    As a result, CL&P recorded an after-tax loss of approximately $80
    million, related to the write down of its investment in Millstone 1.
    The decision allowed for the recovery of CL&P's decommissioning and
    closure obligations.  Accordingly, CL&P recorded a regulatory asset for
    its portion of the decommissioning and closure obligation.  For further
    information on the DPUC decision, see Note 1B, "Commitments and
    Contingencies - Rate Matters" and the MD&A.

    During 1998, CL&P recorded a loss of approximately $27.9 million related
    to the termination of approximately a 4.3 percent entitlement contract
    of CL&P's share of Millstone 1, formerly held by the Connecticut
    Municipal Electric Energy Cooperative.

    CL&P uses external trusts to fund the estimated decommissioning costs of
    Millstone 1.  As of December 31, 1998, CL&P had collected a total of
    $151.7 million through rates toward the future decommissioning costs of
    its share of Millstone 1, of which $129.8 million has been transferred
    to external decommissioning trusts.  At December 31, 1998, the fair
    market value of the balance in the external trusts was approximately
    $210.5 million.

    Yankee Companies: VYNPC owns and operates a nuclear generating unit with
    a service life that is expected to end in 2012.  CL&P's ownership share
    of estimated costs, in year-end 1998 dollars, of decommissioning this
    unit is $50.4 million.

    At December 31, 1998, the remaining estimated obligation, including 
    decommissioning, for the Yankee companies' nuclear generating facilities 
    which have been shut down were:  

                                                Total        CL&P's
    (Thousands of Dollars)                   Obligation      Share

    Maine Yankee.....................         $715,065     $ 85,808
    Connecticut Yankee...............         $498,557     $172,002
    Yankee Atomic....................         $ 81,699     $ 20,016

    For further information on the Yankee companies, see Note 11B,
    "Commitments and Contingencies - Rate Matters."

    For information on proposed changes to the accounting for
    decommissioning, see the MD&A.

4.  SHORT-TERM DEBT

    Limits: The amount of short-term borrowings that may be incurred by CL&P
    is subject to periodic approval by either the SEC under the 1935 Act or
    by the DPUC.  SEC authorization allowed CL&P, as of January 1, 1999, to
    incur total short-term borrowings up to a maximum of $375 million.  In
    addition, the charter of CL&P contains preferred stock provisions
    restricting the amount of unsecured debt the company may incur.  As of
    December 31, 1998, CL&P's charter permits CL&P to incur an additional
    $466 million of unsecured  debt.

    Credit Agreements: NU, CL&P and WMECO are parties to a $313.75 million
    revolving credit agreement (Credit Agreement).  Under the Credit
    Agreement amended on September 11, 1998, CL&P and WMECO are able to
    borrow, subject to the availability of first mortgage bond collateral,
    up to $313.75 million and $150 million, respectively. At December 31,
    1998, CL&P and WMECO have issued first mortgage bonds to enable
    borrowings under this facility up to a maximum of $225 million and $80
    million,  respectively.  NU, which cannot issue first mortgage bonds,
    would be able to borrow up to $50 million if NU consolidated, CL&P and
    WMECO each meet certain interest coverage tests for two consecutive
    quarters.  This requirement for NU has not been met.  In addition, CL&P
    and WMECO each must meet certain minimum quarterly financial ratios to
    access the Credit Agreement.  CL&P is currently in the process of
    obtaining a waiver of the equity financial ratio requirement for the
    quarter ended December 31, 1998.  WMECO satisfied these ratios for the
    quarter ending December 31, 1998.  In connection with obtaining the
    waiver for the equity test, NU's participation in the Credit Agreement
    will be terminated.  The overall limit for all of the borrowing system
    companies under the entire Credit Agreement is $313.75 million.  The
    companies are obligated to pay a facility fee of .50 percent per annum
    of each bank's total commitment under the Credit Agreement, which will
    expire in November 1999.  At December 31, 1998 and 1997, there were $30
    million and $50 million, respectively, in borrowings under this Credit
    Agreement.  Of these amounts, CL&P had $10 million borrowed in 1998 and
    $35 million borrowed in 1997.

    Under the credit facility discussed above, CL&P may borrow funds on a
    short-term revolving basis under its agreement, using either fixed-rate
    loans or standby loans.  Fixed rates are set using competitive bidding.
    Standby loans are based upon several alternative variable rates. The
    weighted average annual interest rate on CL&P's notes payable to banks
    outstanding on December 31, 1998 and 1997, was 6.53 percent and 6.95
    percent, respectively.

    Money Pool:  Certain subsidiaries of NU, including CL&P, are members of
    the Northeast Utilities System Money Pool (Pool).  The Pool provides a
    more efficient use of the cash resources of the NU system, and reduces
    outside short-term borrowings.  NUSCO administers the Pool as agent for
    the member companies.  Short-term borrowing needs of the member
    companies are first met with available funds of other member companies,
    including funds borrowed by NU parent. NU parent may lend to the Pool
    but may not borrow.  Funds may be withdrawn from or repaid to the Pool
    at any time without prior notice. Investing and borrowing subsidiaries
    receive or pay interest based on the average daily Federal Funds rate.
    Borrowings based on loans from NU parent, however, bear interest at NU
    parent's cost and must be repaid based upon the terms of NU parent's
    original borrowing. At December 31, 1998 and 1997, CL&P had no
    borrowings and $61.3 million, respectively, of borrowings outstanding
    from the Pool. The interest rate on borrowings from the Pool on
    December 31, 1998 and 1997 was 5.8 percent, respectively. Maturities of
    short-term debt obligations were for periods of three months or less.

    For further information on short-term debt, including the ability to
    access these agreements, see the MD&A.


5.  PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION

    Details of preferred stock not subject to mandatory redemption are:

                         December 31,     Shares
                            1998        Outstanding
                          Redemption    December 31,        December 31,      
Description                 Price          1998       1998     1997      1996
                                                     (Thousands of Dollars)

$1.90  Series of 1947      $52.50         163,912  $  8,196  $  8,196  $  8,196
$2.00  Series of 1947       54.00         336,088    16,804    16,804    16,804
$2.04  Series of 1949       52.00         100,000     5,000     5,000     5,000
$2.06  Series E of 1954     51.00         200,000    10,000    10,000    10,000
$2.09  Series F of 1955     51.00         100,000     5,000     5,000     5,000
$2.20  Series of 1949       52.50         200,000    10,000    10,000    10,000
$3.24  Series G of 1968     51.84         300,000    15,000    15,000    15,000
 3.90% Series of 1949       50.50         160,000     8,000     8,000     8,000
 4.50% Series of 1956       50.75         104,000     5,200     5,200     5,200
 4.50% Series of 1963       50.50         160,000     8,000     8,000     8,000
 4.96% Series of 1958       50.50         100,000     5,000     5,000     5,000
 5.28% Series of 1967       51.43         200,000    10,000    10,000    10,000
 6.56% Series of 1968       51.44         200,000    10,000    10,000    10,000
Total                                              $116,200  $116,200  $116,200

    All or any part of each outstanding series of such preferred stock may
    be redeemed by CL&P at any time at established redemption prices plus
    accrued dividends to the date of redemption.

6.  PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION

    Details of preferred stock subject to mandatory redemption are:

                         December 31,      Shares
                            1998        Outstanding
                          Redemption    December 31,       December 31,       
Description                Price*           1998      1998     1997      1996 
                                                       (Thousands of Dollars)

7.23%  Series of 1992      $52.17       1,056,434   $ 52,822 $ 75,000 $ 75,000
5.30%  Series of 1993       51.00       1,329,340     66,467   80,000   80,000
                                                     119,289  155,000  155,000

Less preferred stock
  to be redeemed
  within one year......                   395,000     19,750    3,750     -    

Total..................                             $ 99,539 $151,250 $155,000

*Each of these series is subject to certain refunding limitations
 for the first five years after they were issued. Redemption prices
 reduce in future years.

    The following table details redemption and sinking fund activity for
    preferred stock subject to mandatory redemption:

                                  Minimum
                                  Annual
                                Sinking-Fund          Shares Reacquired       
    Series                      Requirement        1998     1997     1996
                           (Thousand of Dollars)

    7.23%  Series of 1992  (1)     $ 3,750        443,566     -        -
    5.30%  Series of 1993  (2)      16,000        270,660     -        -
  
    (1)  Sinking fund requirements commence September 1, 1998.
    (2)  Sinking fund requirements commence October 1, 1999.

         The minimum sinking-fund provisions of the series subject to mandatory
         redemption, for the years 1999 through 2003, aggregate approximately
         $19.8 million each year for 1999 through 2002 and $6.2 million for
         2003.  In case of default on sinking-fund payments, no payments may
         be made on any junior stock by way of dividends or otherwise (other
         than in shares of junior stock) so long as the default continues.
         If CL&P is in arrears in the payment of dividends on any outstanding
         shares of preferred stock, CL&P would be prohibited from redeeming
         or purchasing less than all of the preferred stock outstanding.  All
         or part of each of the series named above may be redeemed by CL&P at
         any time at established redemption prices plus accrued dividends to
         the date of redemption, subject to certain refunding limitations.


7.  LONG-TERM DEBT

    Details of long-term debt outstanding are:
                                                    December 31,
                                                  1998        1997    
                                              (Thousands of Dollars)
    First mortgage bonds:

    6 1/2%  Series T     due 1998..........   $    -      $   20,000
    7 1/4%  Series VV    due 1999..........       74,000      99,000
    5 1/2%  Series A     due 1999..........      140,000     140,000
    5 3/4%  Series XX    due 2000..........      200,000     200,000
    7 7/8%  Series A     due 2001..........      160,000     160,000 
    7 3/4%  Series C     due 2002..........      200,000     200,000 
    6 1/8%  Series B     due 2004..........      140,000     140,000
    7 3/8%  Series TT    due 2019..........       20,000      20,000
    7 1/2%  Series YY    due 2023..........      100,000     100,000
    8 1/2%  Series C     due 2024..........      115,000     115,000
    7 7/8%  Series D     due 2024..........      140,000     140,000
    7 3/8%  Series ZZ    due 2025..........      125,000     125,000
            Total                              1,414,000   1,459,000

    Pollution Control Notes:
      Variable rate, due 2016-2022.........       46,400      46,400
      Variable tax exempt, due 2028-2031...      377,500     377,500
    Fees and interest due for spent
      fuel disposal costs (Note 11E).......      175,022     166,458
    Other..................................           81          86
    Less amounts due within one year.......      214,005      20,011
    Unamortized premium and discount, net..       (5,045)     (6,117)
      Long-term debt, net..................   $1,793,953  $2,023,316

    Long-term debt and cash sinking-fund requirements on debt outstanding
    at December 31, 1998, for the years 1999 through 2002 are approximately
    $214.0 million, $200.0 million, $160.0 million, $200.0 million,
    respectively, and no requirements for 2003.

    All or any part of each outstanding series of first mortgage bonds may
    be redeemed by CL&P at any time at established redemption prices plus
    accrued interest to the date of redemption, except certain series which
    are subject to certain refunding limitations during their respective
    initial five-year redemption periods.

    Essentially all of CL&P's utility plant is subject to the lien of its
    first mortgage bond indenture.  As of December 31, 1998 and 1997, CL&P
    has secured $369.3 million and $315.5 million, respectively, of
    pollution control notes with second mortgage liens on Millstone 1,
    junior to the lien of its first mortgage bond indenture.  The average
    effective interest rate on the variable-rate pollution control notes
    ranged from 3.6 percent to 3.7 percent for 1998 and from 3.6 percent to
    3.7 percent for 1997.

    CL&P has $62 million of tax-exempt Pollution Control Revenue Bonds with
    a bond insurance secured by first mortgage bonds and a liquid facility.

8.  INCOME TAX EXPENSE

    The components of the federal and state income tax provisions
    were(credited)/ charged as follows:
    
    For the Years Ended December 31,        1998        1997         1996    
                                               (Thousands of Dollars)

    Current income taxes:
      Federal.......................     $ (9,217)   $(53,339)    $ 30,650
      State.........................       (3,863)     (3,270)       9,789
        Total current...............     $(13,080)   $(56,609)    $ 40,439

    Deferred income taxes, net:
      Federal.......................      (34,880)      8,436      (22,866)
      State.........................      (17,553)    (11,470)      (9,409)
        Total deferred..............      (52,433)     (3,034)     (32,275)

    Investment tax credits, net.....      (13,256)     (7,366)      (7,367)
        Total income tax
        (credit)/expense............     $(78,769)   $(67,009)    $    797

    The components of total income tax expense are classified as
    follows:
        
    Income taxes charged to
      operating expenses............    $(11,642)    $(59,436)    $    957
    Other income taxes..............     (67,127)      (7,573)        (160)
    Total income tax
        (credit)/expense............    $(78,769)    $(67,009)    $    797



    Deferred income taxes are comprised of the tax effects of temporary
    differences as follows:

    For the Years Ended December 31,        1998        1997         1996    
                                               (Thousands of Dollars)
    Depreciation, leased nuclear fuel,
      settlement credits and
      disposal costs................     $ (5,572)   $  11,991     $  3,981
    Energy adjustment clauses.......      (24,932)     (14,039)      (1,654)
    Demand-side management..........      (12,474)     (12,408)     (17,099)
    Nuclear plant deferrals.........          674       14,007      (18,861)
    Bond redemptions................          152       (1,339)      (1,789)
    Contractual settlements.........        1,252        1,754        2,513
    Pension accruals................        8,872        6,524        2,944
    State net operating loss
      carryforwards.................        1,150       (7,670)        -
    Millstone revenue out of
      rate base.....................      (18,080)        -            -   
    Other...........................       (3,475)      (1,854)      (2,310)
    Deferred income taxes, net......     $(52,433)    $ (3,034)    $(32,275)

    A reconciliation between income tax expense and the expected tax expense
    at the applicable statutory rate is as follows:


    For the Years Ended December 31,        1998        1997         1996    
                                               (Thousands of Dollars)

    Expected federal income tax at
      35 percent of pretax income...     $(96,073)    $(72,312)    $(18,257)
    Tax effect of differences:
      State income taxes, net of
        federal benefit.............       (7,358)      (8,966)         248
      Depreciation..................       25,368       18,944       20,470
      Amortization of
        regulatory assets...........       22,725        3,901        8,601
      Investment tax credit
        amortization and write off..      (13,256)      (7,366)      (7,367)
      Adjustment for prior years'
        taxes.......................      (10,991)         (10)        -   
      Nondeductible penalties.......        2,551          (82)         717
      Other, net....................       (1,735)      (1,118)      (3,615)
          Total income tax
          (credits)/expense.........     $(78,769)    $(67,009)    $    797



9.  PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

    The NU system subsidiaries participate in a uniform noncontributory
    defined benefit retirement plan covering all regular NU system
    employees.  Benefits are based on years of service and the employees'
    highest eligible compensation during 60 consecutive months of
    employment.  CL&P's direct portion of the NU system's pension
    cost/(credit), part of which was credited to utility plant, approximated
    $32.6 million in 1998, ($22.5) million in 1997 and ($8.8) million in
    1996.

    Currently, CL&P annually funds an amount at least equal to that which
    will satisfy the requirements of the Employee Retirement Income Security
    Act and the Internal Revenue Code. Pension costs are determined using
    market-related values of pension assets.

    The NU system's subsidiaries also provide certain health care benefits,
    primarily medical and dental, and life insurance benefits through a
    benefit plan to retired employees.  These benefits are available for
    employees retiring from the company who have met specified service
    requirements.  For current employees and certain retirees, the total
    benefit is limited to two times the 1993 per-retiree health care cost.
    These costs are charged to expense over the future estimated work life
    of the employee.  CL&P is funding postretirement costs through external
    trusts.  CL&P is funding, on an annual basis, amounts that have been
    rate-recovered and which also are tax deductible under the Internal
    Revenue Code.

    Pension and trust assets are invested primarily in domestic and
    international equity securities and bonds.

    The following table represents the plans' beginning benefit obligation
    balance reconciled to the ending benefit obligation balance, beginning
    fair value of plan assets balance reconciled to the ending fair value of
    plan assets balance and the respective funds' funded status reconciled
    to the Consolidated Balance Sheets:



    The components of net cost are:

                                             At December 31, 
                                                           Postretirement
                                     Pension Benefits         Benefits
                                     1998       1997       1998        1997
    (Thousands of Dollars)

    Change in benefit
     obligation
    Benefit obligation at
     beginning of year...........$(531,564)  $(514,989)  $(126,576)  $(137,377)
    Service cost.................   (9,782)     (8,836)     (2,006)     (1,692)
    Interest Cost................  (37,452)    (37,938)     (9,221)     (9,152)
    Transfers....................   (6,324)      2,625        -           -
    Actuarial (loss)/gain........  (12,451)     (9,666)     (7,703)      8,475
    Benefits paid................   34,900      36,291      11,705      13,170
    Curtailments and Settlements.     -            949        -           -
    Benefit obligation at
      end of year................$(562,673)  $(531,564)  $(133,801)  $(126,576)

    Change in plan assets
    Fair value of plan assets at
      beginning of year..........$ 846,366   $ 736,448   $  46,055   $  38,783
    Actual return on  plan assets  117,889     148,834       6,143       7,639
    Employer contribution........     -           -         13,299      12,803
    Benefits paid................  (34,900)    (36,291)    (11,705)    (13,170)
    Transfers....................    6,324      (2,625)       -           -
    Fair value of plan assets
      at end of year.............$ 935,679   $ 846,366   $ 53,792    $  46,055
    Funded status at
      December 31................  373,006     314,802    (80,009)   $ (80,521)
    Unrecognized transition
      amount.....................   (5,525)     (6,445)   102,818      110,162
    Unrecognized prior service
      cost.......................    3,231       3,524       -            -
    Unrecognized net gain........ (295,763)   (269,560)   (22,809)     (29,641)
    Prepaid benefit cost.........$  74,949   $  42,321   $   -       $    -



    The following actuarial assumptions were used in calculating the plans'
    year-end funded status:

                                          At December 31, 
                                                      Postretirement
                                 Pension Benefits        Benefits
                                  1998     1997        1998    1997
    Discount rate..............   7.00%    7.25%       7.00%   7.25%
    Compensation/
      progression rate.........   4.25%    4.25%       4.25%   4.25%
    Health care cost 
      trend rate (a)...........    N/A      N/A        5.22%   5.76%

   (a) The annual growth in per capita cost of covered health care
       benefits was assumed to decrease to 4.40 percent by 2001.

   The components of net periodic benefit cost are: 

   For the Years Ended December 31,

                                Pension Benefits        Postretirement Benefits
                             1998     1997     1996     1998     1997     1996
    (Thousands of Dollars)

Service cost.............. $ 9,782  $ 8,836  $ 9,058  $ 2,006  $ 1,692  $ 2,270
Interest cost.............  37,452   37,938   37,227    9,221    9,152   10,211
Expected return
  on plan assets.......... (68,364) (59,608) (52,258)  (3,555)  (3,132)    (981)
Amortization of  
  unrecognized
  transition
  obligation/(asset)......    (921)    (921)    (921)   7,344    7,344    7,344
Amortization of prior
  service costs...........     292      292      292     -        -        -
Amortization of
  actuarial (gain)/loss... (10,873)  (8,085)  (5,062)    -        -        -
Other amortization,
  net.....................    -        -        -      (1,717)  (2,253)    (967)
Curtailments and
  settlements.............    -        (949)   2,838     -        -        -
Net periodic benefit
  cost/(credit)........... $32,632 $(22,497) $(8,826) $13,299  $12,803  $17,877



    For calculating pension and postretirement benefit costs, the following
    assumptions were used:

                                For the Years Ended December 31, 
                                                            Postretirement
                                Pension Benefits               Benefits
                             1998     1997     1996     1998     1997     1996
Discount rate.............   7.25%    7.75%    7.50%    7.25%    7.75%    7.50%
Expected long-term
  rate of return..........   9.50%    9.25%    8.75%     N/A      N/A      N/A
Compensation/
  progression rate........   4.25%    4.75%    4.75%    4.25%    4.75%    4.75%
Long-term rate
  of return-
  Health assets,
    net of tax............    N/A      N/A      N/A     7.75%    7.50%    5.25%
  Life assets.............    N/A      N/A      N/A     9.50%    9.25%    8.75%

    Assumed health care cost trend rates have a significant effect on the
    amounts reported for the health care plans.  The effect of changing the
    assumed health care cost trend rate by one percentage point in each year
    would have the following effects:

                                   One Percentage    One Percentage
    (Thousands of Dollars)         Point Increase    Point Decrease

    Effect on  total service
      and interest cost
      components...............       $  553            $  (560)
    Effect on post-
      retirement benefit
      obligation...............        7,358             (7,275)

    The trust holding the health plan assets is subject to federal income
    taxes at a 39.6 percent tax rate.


10. SALE OF CUSTOMER RECEIVABLES AND ACCRUED UTILITY REVENUES
    CL&P has entered into an agreement to sell up to $200 million of
    undivided ownership interests in eligible customer receivables and
    accrued utility revenues (receivables).

    CL&P has established a special purpose, wholly owned subsidiary whose
    business consists of the purchase and resale of receivables, CL&P
    Receivables Corporation (CRC).  For receivables sold, CL&P has retained
    collection responsibilities as agent for the purchaser under the
    company's agreement.  As collections reduce previously sold receivables,
    new receivables may be sold.  At December 31, 1998, approximately $105
    million of receivables had been sold to third-party purchasers by CL&P.
    All receivables sold to CRC are not available to pay CL&P's creditors.

    The receivables are sold to a third-party purchaser with limited
    recourse.  The sales agreements provide for a formula-based loss reserve
    in which additional receivables may be assigned to the third-party
    purchaser for costs such as bad debt.  The third-party purchaser absorbs
    the excess amount in the event that actual loss experience exceeds the
    loss reserve.  At December 31, 1998, approximately $11.6 million was the
    formula-based amount of credit exposure and has been reserved as
    collateral by CRC.  Historical losses for bad debt for CL&P has been
    substantially less.

    Concentrations of credit risk to the purchaser under CL&P's agreement
    with respect to the receivables are limited due to CL&P's diverse
    customer base within its service territory.

11. COMMITMENTS AND CONTINGENCIES

    A. Restructuring
       During April 1998, the utility restructuring bill was signed into
       law by the governor of the state of Connecticut.  The legislation
       provides for electric utilities, including CL&P, to recover
       stranded costs. The legislation also allows for securitization of
       generation-related regulatory assets and the costs associated with
       renegotiated above-market purchased-power contracts and requires
       divestiture of generation-related assets through public auction.

       As a result of the restructuring legislation, CL&P will sell non-
       nuclear generating assets and purchased-power contracts with
       nonutility generators through public auction.  CL&P also will
       transfer its ownership interests in Millstone 2 and 3 and Seabrook
       to a corporate affiliate or division, subject to prior federal
       regulatory approvals, which would assume CL&P's responsibilities
       related to the plants for the period prior to offering them for the
       sale.  In February 1999, the DPUC announced the offering for sale
       of CL&P's fossil fueled and hydroelectric generating facilities.
       Interested parties will be required to submit nonbinding bids by
       April 8, 1999.  A smaller field of qualified bidders will be
       selected to participate in the second round of the auction and will
       be invited to submit binding bids.  A winning bidder will be chosen
       by mid-1999 and the sale will be completed by the end of 1999.  At
       December 31, 1998, the book value of assets to be auctioned during
       1999 was approximately $170 million.

       After restructuring is complete, CL&P will be an electric
       transmission and distribution company which will continue to
       provide transmission and distribution services on a cost-of-service
       basis.

       Management continues to believe that it is probable that CL&P will
       fully recover its prudently incurred costs, including regulatory
       assets and stranded investments.

    B. Rate Matters
       On February 25, 1998, the DPUC issued its decision in CL&P's
       Interim Rate case.  During the period from March 1, 1998 through
       September 28, 1998, rates were charged under an interim rate which
       required a $30.5 million annual credit to customer bills to reflect
       the removal of Millstone 1 from rates.

       During April 1998, the DPUC issued a decision finding Millstone 2
       unlikely to restart in 1998 and ordered its removal from rate base
       effective May 1, 1998.  The DPUC allowed the revenue requirement
       reductions related to this decision to be potentially applied
       against regulatory asset balances.  As a result, there was no
       change in rates or CL&P's cash flow from rates.  CL&P has accounted
       for these reductions as a reserve against revenues until such time
       when the regulatory asset balances are reduced.  At December 31,
       1998, the amount of revenue reductions related to this decision
       totaled approximately $36.4 million.  The unit will remain out of
       rate base until the plant is restarted.

       On June 1, 1998, CL&P filed its rate application for a
       comprehensive rate proceeding.  On February 5, 1999, the DPUC
       issued its final decision in CL&P's rate case.   The DPUC concluded
       that CL&P's annual revenue requirements should be reduced by
       approximately $232 million, or 9.68 percent, through a combination
       of a 4 percent reduction to CL&P's rates and accelerated
       amortization of approximately $136 million of its deferred tax
       regulatory asset.  The decision is retroactive to September 28,
       1998.  The retroactive portion of the decision did not require a
       base-rate decrease. It resulted in accelerated amortization of the
       deferred tax regulatory asset in the amount of $27.6 million.  The
       decision also resulted in an after-tax write-off of approximately
       $80 million related to CL&P's investment in Millstone 1. For
       further information, see Note 3, "Nuclear Decommissioning and
       Plant Closure Costs," and the MD&A.

       FERC:  During November 1997, MYAPC filed an amendment to its power
       contracts clarifying the obligations of its purchasing utilities
       following the decision to cease power production.  During January
       1998, the FERC accepted the amendments and proposed rates, subject
       to a refund. On January 18, 1999, MYAPC filed with the FERC
       Administrative Law Judge  (ALJ) an Offer of Settlement which if
       accepted by the FERC, will resolve all the issues in the FERC
       decommissioning rate case proceeding.  The settlement provides,
       among other things, the following:  (1) MYAPC will collect $33.6
       million annually to pay for decommissioning and spent fuel; (2) its
       return on equity will be set at 6.5 percent; (3) MYAPC is permitted
       full recovery of all unamortized investment in MY, including fuel,
       and (4) an incentive budget for decommissioning is set at $436.3
       million.

       During late December 1996, CYAPC filed an amendment to its power
       contracts clarifying the obligations of its purchasing utilities
       following the decision to cease power production.  On February 27,
       1997, the FERC accepted CYAPC's contract amendment.  The new rates
       became effective March 1, 1997, subject to a refund.

       On August 31, 1998, the FERC ALJ released an initial decision
       regarding the December 1996 filing.  The decision contained
       provisions which would allow for the recovery, through rates, of
       the balance of the NU system companies' net unamortized investment
       in CYAPC, which was approximately $51.7 million as of December 31,
       1998. The decision also called for the disallowance of the recovery
       of a portion of the return on the CY investment.  The ALJ's
       decision also stated that decommissioning collections should
       continue to be based on the previously approved estimate of $309.1
       million (in 1992 dollars), with an inflation adjustment of 3.8
       percent per year, until a new, more reliable estimate has been
       prepared and tested.

       During October 1998, CYAPC, CL&P, PSNH and WMECO filed briefs on
       exceptions to the ALJ decision. If the initial ALJ decision is
       upheld, CYAPC could be required to write off a portion of the
       regulatory asset associated with the plant closing.

       If upheld, CYAPC's management has estimated the effect of the ALJ
       decision on CYAPC's earnings would be approximately $37.5 million,
       of which CL&P's share would be approximately $6.4 million.  NU
       management cannot predict the ultimate outcome of the hearing at
       this time, however, management believes that the associated
       regulatory assets are probable of recovery.

    C. Nuclear Performance
       Millstone:  The three Millstone units are managed by NNECO.  All
       three units were placed on the NRC watch list on January 29, 1996.
       The units cannot be restarted without appropriate NRC approvals.
       Millstone 3 has received these approvals and resumed operation in
       July 1998.  Restart efforts continue for Millstone 2 and it is
       expected to be ready to restart in the spring of 1999. The
       estimated replacement power costs are approximately $7 million per
       month while  Millstone 2 remains out of service.  In July 1998,
       CL&P and WMECO decided to retire Millstone 1 and prepare for final
       decommissioning.

       Litigation: Certain of the non-NU joint owners of Millstone 3
       have filed demands for arbitration with CL&P and WMECO as well
       as lawsuits in Massachusetts Superior Court against NU and its
       current and former trustees related to the company's operation of
       Millstone 3.  The arbitrations and lawsuits seek to recover
       compensatory damages in excess of $200 million, together with
       punitive damages, treble damages and attorney's fees. Management
       cannot estimate the potential outcome of these suits but believes
       there is no legal basis for the claims and intends to defend
       against them vigorously.

    D. Environmental Matters
       The NU system is subject to regulation by federal, state and local
       authorities with respect to air and water quality, the handling and
       disposal of toxic substances and hazardous and solid wastes, and
       the handling and use of chemical products. The NU system has an
       active environmental auditing and training program and believes
       that it is in substantial compliance with current environmental
       laws and regulations.  However, the NU system is subject to certain
       pending enforcement actions and governmental investigations in the
       environmental area.  Management cannot predict the outcome of these
       enforcement actions and investigations.

       Environmental requirements could hinder the construction of new
       generating units, transmission and distribution lines, substations
       and other facilities.  Changing environmental requirements could
       also require extensive and costly modifications to CL&P's existing
       generating units and transmission and distribution systems, and
       could raise operating costs significantly.  As a result, CL&P may
       incur significant additional environmental costs, greater than
       amounts included in cost of removal and other reserves, in
       connection with the generation and transmission of electricity and
       the storage, transportation and disposal of byproducts and wastes.
       CL&P also may encounter significantly increased costs to remedy
       the environmental effects of prior waste handling activities.  The
       cumulative long-term cost impact of increasingly stringent
       environmental requirements cannot be estimated accurately.

       CL&P has recorded a liability based upon currently available
       information for the estimated environmental remediation costs
       that it expects to incur.  In most cases, additional future
       environmental cleanup costs are not reasonably estimable due to
       a number of factors, including the unknown magnitude of possible
       contamination, the appropriate remediation methods, the possible
       effects of future legislation or regulation and the possible
       effects of technological changes. At December 31, 1998, the
       liability recorded by CL&P for its estimated environmental
       remediation costs, not considering any possible recoveries from
       third parties, amounted to approximately $8.0 million, within a
       range of $8.0 million to $19.3 million.

       CL&P has received proceeds from several insurance carriers for
       the settlement with certain insurance companies of all past,
       present and future environmental matters.  As a result of these
       settlements, CL&P will retain the risk loss, in part, for some
       environmental remediation costs.

       CL&P cannot estimate the potential liability for future claims,
       including environmental remediation costs, that may be brought
       against it.  However, considering known facts, existing laws and
       regulatory practices, management does not believe the matters
       disclosed above will have a material effect on the NU system's
       financial position or future results of operations.

    E. Spent Nuclear Fuel Disposal Costs
       Under the Nuclear Waste Policy Act of 1982, CL&P must pay the
       United States Department of Energy (DOE) for the disposal of 
       spent nuclear fuel and high-level radioactive waste. The DOE is
       responsible for the selection and development of repositories for,
       and the disposal of, spent nuclear fuel and high-level radioactive
       waste.  Fees for nuclear fuel burned on or after April 7, 1983, are
       billed currently to customers and paid to the DOE on a quarterly
       basis.  For nuclear fuel used to generate electricity prior to
       April 7, 1983 (prior period fuel), payment must be made prior to
       the first delivery of spent fuel to the DOE.  Until such payment is
       made, the outstanding balance will continue to accrue interest at
       the three-month Treasury Bill Yield Rate.  At December 31, 1998,
       fees due to the DOE for the disposal of prior period fuel were
       approximately $175.0 million, including interest costs of $108.5
       million.

       The DOE was originally scheduled to begin accepting delivery of
       spent fuel in 1998.  However, delays in identifying a permanent
       storage site have continually postponed plans for the DOE's long-
       term storage and disposal site.   Extended delays or a default by
       the DOE could lead to consideration of costly alternatives.  The
       company has primary responsibility for the interim storage of
       its spent nuclear fuel.  Adequate storage capacity exists to
       accommodate all spent nuclear fuel at Millstone 1.  With the
       addition of new storage racks, storage facilities for Millstone 3
       are expected to be adequate for the projected life of the unit.
       With the implementation of currently planned modifications, the
       storage facilities for Millstone 2 are expected to be adequate to
       accommodate a full-core discharge from the reactor until 2005.
       Fuel consolidation, which has been licensed for Millstone 2, could
       provide adequate storage capability for its projected life.
       Seabrook is expected to have spent fuel storage capacity until at
       least 2010.  Meeting spent fuel storage requirements beyond these
       periods could require new and separate storage facilities, the
       costs for which have not been determined.

       In November 1997, the U.S. Court of Appeals for the D.C. Circuit
       ruled that the lack of an interim storage facility does not excuse
       the DOE from meeting its contractual obligation to begin accepting
       spent nuclear fuel no later than January 31, 1998.   The 1997
       ruling by the appeals court said, however, that the 1982 federal
       law could not require the DOE to accept waste when it did not have
       a suitable storage facility.  The court directed the plaintiffs to
       pursue relief under the terms of their contracts with the DOE.
       Based on this ruling, since the DOE did not take the spent nuclear
       fuel as scheduled, it may have to pay contract damages.

       In May 1998, the same court denied petitions from 60 states and
       state agencies, collectively, and 41 utilities, including the
       company, asking the court to compel the DOE to submit a program,
       beginning immediately, for disposing of spent nuclear fuel.  The
       petitions were filed after the DOE defaulted on its January 31,
       1998 obligation to begin accepting the fuel.  The court directed
       the company and other plaintiffs to pursue relief under the terms
       of their contracts with the DOE.

       In a petition filed in August 1998, the court's May 1998 decision
       was appealed to the U.S. Supreme Court.  In November 1998, the
       Supreme Court declined to review the lower court ruling that said
       utilities should go to court and seek monetary damages from the
       DOE.  The ultimate outcome of this legal proceeding is uncertain at
       this time.
 
    F. Nuclear Insurance Contingencies
       Under certain circumstances, in the event of a nuclear incident at
       one of the nuclear facilities in the country covered by the federal
       government's third-party liability indemnification program, an
       owner of a nuclear unit could be assessed in proportion to its
       ownership interest in each of its nuclear units up to $83.9
       million.  Payments of this assessment would be limited to $10.0
       million in any one year per nuclear incident based upon the owner's
       pro rata ownership interest in each of its nuclear units.  In
       addition, the owner would be subject to an additional 5 percent or
       $4.2 million, in proportion to its ownership interests in each of
       its nuclear units, if the sum of all claims and costs from any
       one nuclear incident exceeds the maximum amount of financial
       protection. Based upon its ownership interests in Millstone 1, 2
       and 3 and in Seabrook 1, CL&P's maximum liability, including any
       additional assessments, would be $192.9 million per incident, of
       which payments would be limited to $21.9 million per year. In
       addition, through power purchase contracts with VYNPC and CYAPC,
       CL&P would be responsible for up to an additional $8.4 million per
       incident, of which payments would be limited to $1.0 million per
       year.

       Insurance has been purchased to cover the primary cost of repair,
       replacement or decontamination of utility property resulting from
       insured occurrences.  CL&P is subject to retroactive assessments if
       losses exceed the accumulated funds available to the insurer.  The
       maximum potential assessment against CL&P with respect to losses
       arising during the current policy year is approximately $9.5
       million under the primary property insurance program.

       Insurance has been purchased to cover certain extra costs incurred
       in obtaining replacement power during prolonged accidental outages
       and the excess cost of repair, replacement or decontamination or
       premature decommissioning of utility property resulting from
       insured occurrences.  CL&P is subject to retroactive assessments if
       losses exceed the accumulated funds available to the insurer.  The
       maximum potential assessments against CL&P with respect to losses
       arising during current policy years are approximately $4.6 million
       under the replacement power policies and $10.0 million under the
       excess property damage, decontamination and decommissioning
       policies. The cost of a nuclear incident could exceed available
       insurance proceeds.

       Insurance has been purchased aggregating $200 million on an
       industry basis for coverage of worker claims.

    G. Construction Program
       The construction program is subject to periodic review and revision
       by management. CL&P currently forecasts construction expenditures
       of approximately $1.5 billion for the years 1999-2003, including
       $231 million for 1999. In addition, CL&P estimates that nuclear
       fuel requirements, including nuclear fuel financed through the
       NBFT, will be approximately $158.5 million for the years 1999-2003,
       including $25.2 million for 1999.  See Note 2, "Leases," for
       additional information about the financing of nuclear fuel.

    H. Long-Term Contractual Arrangements
       Yankee Companies:  CL&P, WMECO and PSNH rely on VY for
       approximately 1.4 percent of their capacity under long-term
       contracts.  Under the terms of their agreements, the NU system
       companies pay their ownership (or entitlement) shares of costs
       which include depreciation, operation and maintenance expenses,
       taxes, the estimated cost of decommissioning and a return on
       invested capital.  These costs are recorded as purchased-power
       expense and are recovered through the companies' rates.  CL&P's
       total cost of purchases under contracts with VYNPC amounted to
       $15.9 million in 1998, $14.1 million in 1997 and $14.8 million
       in 1996.

       Nonutility Generators:  CL&P has entered into various arrangements
       for the purchase of capacity and energy from nonutility generators
       (NUGs). These arrangements have terms from 10 to 30 years,
       currently expiring in the years 1999 through 2029, and require
       CL&P to purchase energy at specified prices or formula rates.  For
       the 12-month period ending December 31, 1998, approximately 13 percent
       of NU system electricity requirements were met by NUGs. CL&P's
       total cost of purchases under these arrangements amounted to $290.7
       million in 1998, $283.2 million in 1997 and $279.5 million in 1996.

       Hydro-Quebec:  Along with other New England utilities, CL&P, PSNH,
       WMECO and HWP have entered into agreements to support transmission
       and terminal facilities to import electricity from the Hydro-Quebec
       system in Canada.  CL&P is obligated to pay, over a 30-year period
       ending in 2020, its proportionate share of the annual O&M and
       capital costs of these facilities.

       Estimated Annual Costs:  The estimated annual costs of CL&P's
       significant long-term contractual arrangements are as follows:

                                                                              
                          1999    2000     2001     2002     2003    
                                   (Millions of Dollars)

    VYNPC               $ 17.0   $ 15.8   $ 17.2   $ 17.5   $ 16.3
    NUGs                 290.3    298.7    292.3    296.1    301.6
    Hydro-Quebec          18.3     17.6     17.1     16.7     16.2



12. FUEL-PRICE RISK-MANAGEMENT

    CL&P uses swap instruments with financial institutions to hedge against
    some of the fuel price risk created by long-term negotiated energy
    contracts.  These agreements minimize exposure associated with rising
    fuel prices by managing a portion of CL&P's cost of producing power for
    these negotiated energy contracts.  As of December 31, 1998, CL&P had
    outstanding agreements with a total notional value of approximately
    $422.2 million and a negative mark-to-market position of approximately
    $44.9 million.

    The terms of the agreements require CL&P to post cash collateral with
    its counterparties in the event of negative mark-to-market positions and
    lowered credit ratings.  The amount of the collateral is to be returned
    to CL&P when the mark-to-market position becomes positive, when CL&P
    meets specified credit ratings or when an agreement ends and all open
    positions are properly settled.  At December 31, 1998, cash collateral
    in the amount of $45.7  million was posted under these terms.  This
    amount has been recorded in Other Investments on the accompanying
    Consolidated Balance Sheets.

    These agreements have been made with various financial institutions,
    each of which is rated "A3" or better by Moody's rating group.  CL&P
    will be exposed to credit risk on its respective market risk management
    instruments if the counterparties fail to perform their obligations.
    However, management anticipates that the counterparties will be able to
    fully satisfy their obligations under the agreements.

13. MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY

    CL&P Capital LP (CL&P LP, a subsidiary of CL&P) had previously issued
    $100 million of cumulative 9.3 percent Monthly Income Preferred
    Securities (MIPS), Series A.  CL&P has the sole ownership interest
    in CL&P LP, as a general partner, and is the guarantor of the MIPS
    securities.  Subsequent to the MIPS issuance, CL&P LP loaned the
    proceeds of the MIPS issuance, along with CL&P's $3.1 million capital
    contribution, back to CL&P in the form of an unsecured debenture.
    CL&P consolidates CL&P LP for financial reporting purposes.  Upon
    consolidation, the unsecured debenture is eliminated and the MIPS
    securities are accounted for as minority interests.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

    The following methods and assumptions were used to estimate the fair
    value of each of the following financial instruments:

    Supplemental Executive Retirement Plan investments:  SFAS 115,
    "Accounting for Certain Investments in Debt and Equity Securities,"
    requires investments in debt and equity securities to be presented at
    fair value.  As a result of this requirement, the investments having
    a cost basis of $5.4 million held for benefit of the Supplemental
    Executive Retirement Plan were recorded on the Consolidated Balance
    Sheets at their fair market value at December 31, 1998 of $8.7 million.

    Nuclear decommissioning trusts: The investments held in the NU system
    companies' nuclear decommissioning trusts were adjusted to market by
    approximately $110.4 million as of December 31, 1998 and $69.6 million
    as of December 31, 1997, with corresponding offsets to the accumulated
    provision for depreciation.  The amounts adjusted in 1998 and in 1997
    represent cumulative net unrealized gains.  The cumulative gross
    unrealized holding losses were immaterial for both 1998 and 1997.

    Preferred stock and long-term debt: The fair value of the NU system's
    fixed-rate securities is based upon the quoted market price for those
    issues or similar issues. Adjustable rate securities are assumed to have
    a fair value equal to their carrying value. The carrying amounts of
    CL&P's financial instruments and the estimated fair values are as
    follows:


                                          Carrying         Fair
    At December 31, 1998                   Amount          Value   
                                          (Thousands of Dollars)

    Preferred stock not subject
      to mandatory redemption..........   $  116,200     $   77,217

    Preferred stock subject to
      mandatory redemption.............      119,289        108,108

    Long-term debt -
      First mortgage bonds.............    1,414,000      1,421,926

      Other long-term debt.............      599,003        601,158

    MIPS...............................      100,000        102,000




                                          Carrying         Fair
    At December 31, 1997                   Amount          Value   
                                          (Thousands of Dollars)

    Preferred stock not subject
      to mandatory redemption..........   $  116,200     $  62,889

    Preferred stock subject to
      mandatory redemption.............      155,000       135,600

    Long-term debt -
      First mortgage bonds.............    1,459,000     1,435,772

      Other long-term debt.............      590,443       590,443

    MIPS...............................      100,000       100,760


    The fair values shown above have been reported to meet disclosure
    requirements and do not purport to represent the amounts at which those
    obligations would be settled.



15. OTHER COMPREHENSIVE INCOME

    During 1998, CL&P adopted SFAS 130, "Reporting Comprehensive Income,"
    which established standards for reporting and displaying comprehensive
    income and its components in a financial statement that is displayed
    with the same prominence as other financial statements.  During 1997 and
    1996, CL&P had no material other comprehensive income items.

    The accumulated balance for each other comprehensive income item is as
    follows:

                                                    Current
                                     December 31,   Period    December 31,
                                        1997        Change       1998
    (Thousands of Dollars)
    Unrealized gain on
      securities..................     $  -          $ 638       $ 638
    Minimum pension
      liability adjustment........        -           (260)       (260)
    Accumulated other
      comprehensive income........     $  -          $ 378       $ 378


    The changes in the components of other comprehensive income are reported
    on the Consolidated Statements of Comprehensive Income net of the
    following income tax effects.

                                        1998         1997        1996
    (Thousands of Dollars)
    Unrealized gain on
      securities..................     $(446)        $  -        $  - 
    Minimum pension
      liability adjustment........       182            -           - 
    Other comprehensive
      income......................     $(264)        $  -        $  - 




To the Board of Directors
   of The Connecticut Light and Power Company:

    We have audited the accompanying consolidated balance sheets of The
Connecticut Light and Power Company (a Connecticut corporation and a
wholly owned subsidiary of Northeast Utilities) and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated  statements of
income, comprehensive income, common stockholder's equity and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

    We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and perform 
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall  financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

    In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The
Connecticut Light and Power Company and subsidiaries as of December 31,
1998 and 1997, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.



                                             /s/ ARTHUR ANDERSEN LLP
                        
                                                 ARTHUR ANDERSEN LLP



Hartford, Connecticut
February 23, 1999




The Connecticut Light and Power Company and Subsidiaries

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section contains management's assessment of Connecticut Light and
Power's (CL&P or the company) financial condition and the principal factors
having an impact on the results of operations. The company is a wholly-owned
subsidiary of Northeast Utilities (NU). This discussion should be read in
conjunction with the company's consolidated financial statements and
footnotes.

FINANCIAL CONDITION

CL&P's financial outlook improved in 1998 despite reductions in retail rates.
The improved outlook is a result of the successful restart of the Millstone 3
nuclear power plant, significant progress toward the restart of Millstone 2
and significant reductions in operating expenses.

CL&P had a net loss of approximately $196 million in 1998, compared to a net
loss of approximately $140 million in 1997.  The greater loss in 1998 was the
result of significant write-offs of the company's investment in the retired
Millstone 1 nuclear power plant and the accelerated amortization of
regulatory assets as ordered by Connecticut regulators in a February 1999
retail rate decision.

Operation and maintenance (O&M) costs at Millstone Station declined to $315
million in 1998 from $440 million in 1997.  These decreases were driven
primarily by the decision to retire Millstone 1 and the return to service of
Millstone 3.  In addition, total fuel and purchased power costs decreased to
$887 million in 1998 as compared to $977 million in 1997, primarily due to
the restart of Millstone 3.

Total revenues fell 3 percent to $2.39  billion in 1998 from $2.47 billion in
1997.  The fall in revenues occurred despite a 2.2 percent increase in retail
kilowatt-hour sales for the year.  The lower revenues resulted primarily from
the removal of the Millstone units from the company's retail rate base.

Also offsetting the lower O&M were significant increases in certain noncash
expenses.  Primarily as a result of Connecticut regulatory decisions,
amortization of regulatory assets totaled $121 million in 1998, up from $62
million in 1997.

CL&P's ability to improve its financial performance in 1999 will depend
primarily on its success in bringing Millstone 2 back on line, and further
reducing its operating costs to help offset continued downward pressure on
retail revenues.  CL&P will continue to be negatively impacted by the $232
million reduction in revenue requirements ordered by Connecticut state
regulators in February 1999.

Restructuring

Although CL&P continues to operate under cost-of-service based regulation,
future rates and the recovery of stranded costs are issues that will be
addressed as restructuring legislation is implemented. Stranded costs are
expenditures or commitments that have been made to meet public service
obligations with the expectation that they would be recovered from customers.
However, under certain circumstances these costs might not be recoverable
from customers in a fully competitive electric utility industry (i.e., the
costs may result in above-market energy prices).

CL&P has exposure to stranded costs for its investments in high-cost nuclear
generating plants, state-mandated purchased-power obligations and significant
regulatory assets. As of December 31, 1998, CL&P's net investment in nuclear
generating plants was approximately $1.9 billion and its regulatory assets
were approximately $1.4 billion.  CL&P's financial strength will be
negatively affected if it is unable to recover past investments and
commitments.

In April 1998, Connecticut enacted comprehensive electric utility
restructuring legislation.  The act provides for rates to be capped at
December 31, 1996, levels until December 31, 1999.  Retail choice will be
phased in over six months beginning January  1, 2000, and will extend to all
retail customers by July 2000. Customers not choosing an alternate supplier
can continue to receive service until January 2004 at a rate that is at least
10 percent less than 1996 rates.  The law allows for recovery of all
prudently incurred stranded costs and mandates the functional separation of
competitive and regulated businesses.  To qualify for stranded cost recovery,
CL&P must auction off its fossil and hydroelectric generating facilities
prior to January 2000, and its nuclear generating assets prior to January
2004. CL&P also received regulatory approval to auction any of its purchased-
power contracts which cannot be renegotiated by March 1999.

The Connecticut legislation allows the use of securitization after January 1,
2000,  to further reduce the costs of the transition to a competitive
marketplace.  The use of securitization is limited, however, to non-nuclear
generation-related regulatory assets and costs associated with the
renegotiation of purchased-power contracts. CL&P may not securitize nuclear
stranded costs.  The Connecticut Department of Public Utility Control (DPUC)
will initiate an investigation into CL&P's stranded costs in the spring of
1999 with a final decision expected before the end of the year.

As a result of the corporate unbundling and divestiture proposals, CL&P
would redefine itself as a distribution company under the restructuring
legislation, and would provide generation services only to the extent
necessary to provide standard offer, backup and default services as required
by customers who have not chosen an alternate energy supplier.

Rate Matters

In February 1999, the DPUC issued a final order in CL&P's retail rate
proceeding reducing CL&P's revenue requirements by $232 million retroactive
to September 28, 1998.  To implement that reduction, the DPUC ordered CL&P to
reduce its retail base rates by approximately $96 million annually and to
increase its amortization of regulatory assets by $136 million annually.  The
rate order allowed CL&P to earn a return on equity of 10.3 percent.  The DPUC
also said it would allow CL&P to recover only $126 million of its investment
in Millstone 1 undepreciated plant and related assets.  As a result of this
decision, CL&P reflected in 1998 a one-time pre-tax charge of $116.5 million
and began amortizing its remaining Millstone 1 investment over three years.

In a February 1998 decision, the DPUC  removed Millstone 2 from CL&P's rate
base effective May 1, 1998, and Millstone 3 effective July 1, 1998. On July
18, 1998, Millstone 3 returned to rate base.  Millstone 1 previously had been
removed from CL&P's rate base effective March 1, 1998, with customers
receiving a temporary credit of approximately 1.4 percent, or $30 million
annually, on their bills.

The removal of Millstone 2 reduced CL&P's noncash revenues by approximately
$3 million a month.  This reduction was increased in the 1999 rate order to
nearly $6.6 million per month to reflect lower fuel costs.  Actual fuel costs
are subject to true-up in the Energy Adjustment Clause.

Millstone Nuclear Units
CL&P owns 81.0 percent of  Millstone 2 and approximately 52.9 percent of
Millstone 3. CL&P's poor financial performance from 1996 through 1998 was
primarily due to the lengthy outages at Millstone.  Costs peaked in 1997 when
replacement power costs and operation and maintenance costs totaled nearly
$730 million.  In 1998, Millstone-related costs fell significantly as
Millstone 3 returned to service and Millstone 1 began to prepare for
decommissioning.

After a 27-month outage, Millstone 3 received Nuclear Regulatory Commission
(NRC) permission to restart in June 1998 and reached full power in July.  The
unit achieved a capacity factor of approximately 70 percent in 1998 following
its return to service.  CL&P's share of the operation, maintenance and
replacement power costs associated with Millstone 3 totaled approximately
$131 million in 1998, down from $241 million in 1997.  The unit remains on
the NRC's watch list  with a Category 2 designation, which means that it
will continue to be subject to heightened NRC oversight.  A refueling and
maintenance outage is scheduled to begin in May 1999.

Millstone 2 remains on the NRC watch list with a Category 3 designation,
meaning that NRC commissioners must formally vote to allow restart.
Key steps before restart include final verification that the unit is in
conformance with its design and licensing basis; that management processes
support safe and conservative operations; and that the employees are
effective at identifying and correcting deficiencies at the unit.  Millstone
2 is on schedule for a spring 1999 restart following final NRC review and
approval.  Millstone 2's return is expected to restore $6.6 million a month
in noncash revenues to CL&P, reduce fuel and purchased-power expense by
approximately $7 million a month, and significantly reduce the unit's
operation and maintenance expenses, which totaled $178 million in 1998.
In a July 1998 filing with the DPUC, management concluded that Millstone 2
had over $400 million of economic value over the 17 years remaining on its
license life.  In its February rate decision, the DPUC concurred that the
unit was economic for customers and ordered it to be restored to CL&P rate
base once it operates at 75 percent or more power for 100 consecutive hours.

Liquidity

CL&P successfully refinanced more than $600 million in expiring debt
obligations and bank commitments in 1998 despite a significant reported
loss.  CL&P converted a total of  $362 million variable-rate tax exempt debt
to fixed-rate tax exempt debt carrying interest rates of 5.85 to 5.95 percent.
Niantic Bay Fuel Trust (NBFT), which finances CL&P's and WMECO's nuclear fuel
at Millstone, refinanced maturing notes and bank lines through the issuance
of $180 million of five-year 8.59 percent notes.  The success in refinancing
CL&P's obligations was due primarily to the progress shown in 1998 by
returning Millstone 3 to service and improved cash flows.

Net cash flows from operations totaled approximately $389 million in 1998, up
sharply from $73 million in 1997.  Approximately $208 million of net cash
flow was used for investment activities, including construction expenditures
and investments in nuclear decommissioning trusts, compared with $144 million
in 1997.  Another  $14 million was used to pay preferred dividends, compared
with $21 million in common and preferred dividends in 1997.  The balance of
cash used for financing activities, approximately $167 million, was used to
pay off long-term, short-term debt and preferred stock, a significant shift
from 1997 when net debt and preferred stock levels increased by $92 million.

The return to service of Millstone 3 and resulting reduction in costs
stabilized the NU system's credit ratings in mid-1998 after repeated
downgrades in 1996 and 1997.  Moody's Investors Service, which had downgraded
CL&P, WMECO, and NU debt in April 1998, upgraded those same ratings in July
1998 and established a "positive" outlook.  Also in July, Standard & Poor's
(S&P) removed the NU system from "CreditWatch--negative" for the first time
in more than two years.  In September 1998, S&P upgraded CL&P, WMECO and PSNH
first mortgage bonds.

The rating agency actions also were due in part to the NU system's success in
1998 in maintaining access to its various credit lines.  Key covenants on a
$313.75 million revolving credit line primarily serving CL&P and WMECO were
adjusted in the fall.  The CL&P rate decision resulted in the need for a
waiver of the revolver's equity test in the fourth quarter, which was
negotiated with banks in March 1999.

The $313.75 million revolving credit line will expire on November 21, 1999.
As of  February 23, 1999, CL&P had $165 million outstanding under that line.
CL&P met a $140 million bond maturity on February 1, 1999. Management expects
those borrowings to increase further in the first half of 1999 as CL&P pays
off a $74 million bond issue that matures July 1, 1999.

CL&P has also arranged financing agreements through the sale of its accounts
receivables.  CL&P can finance up to $200 million through these facilities.
As of December 31, 1998, CL&P had financed $105 million through its accounts
receivable line.

For additional information on the sales of accounts receivable, see "Notes
to Consolidated Financial Statements," Note 10.

CL&P is party to an operating lease with General Electric Capital Corporation
related to the use of four turbine generators having an installed cost of
approximately $70 million and a stipulated loss value of $59 million.  CL&P
must meet certain financial covenants that are substantially similar to the
revolving credit line.  CL&P has received a waiver of these tests for the
fourth quarter of 1998 as a result of the CL&P rate decision.

The permanent shutdown of Millstone 1 in July 1998 could require CL&P and
WMECO to immediately repay the NBFT approximately $80 million of capital
lease obligations.  CL&P is seeking consents from the note holders to amend
the lease so that they will not be obligated to make this payment.  As
consideration for the note holders' consents, the companies intend to issue
an additional $80 million of first mortgage bonds in mid-1999.

Nuclear Decommissioning

The staff of the SEC has questioned certain current accounting practices of
the electric utility industry, regarding the recognition, measurement and
classification of decommissioning costs for nuclear generating units in the
financial statements.  In response to these questions, the Financial
Accounting Standards Board (FASB) had agreed to review the accounting for
closure and removal costs, including decommissioning.  If current electric
utility industry accounting practices for nuclear power plant decommissioning
are changed, the annual provision for decommissioning could increase relative
to 1998, and the estimated cost for decommissioning could be recorded as a
liability (rather than as accumulated depreciation), with recognition of an
increase in the cost of the related nuclear power plant.  As management
believes decommissioning costs will continue to be recovered through rates,
changes to the accounting will not affect net income.

Millstone 1

CL&P has an ownership interest of 81 percent in Millstone 1.  Based on a
continued unit operation study filed with the DPUC in July 1998, CL&P and
WMECO decided to retire Millstone 1 and begin decommissioning activities.
Subsequently, Millstone 1 was removed from the NRC's watch list.

CL&P's share of  the total estimated decommissioning costs for Millstone 1,
which have been updated to reflect the early shutdown of the unit, is
approximately $560.5 million in December 1998 dollars. CL&P uses external
trusts to fund the decommissioning costs. In 1998, CL&P recorded a charge of
approximately $143.2 million for the write-off of its investment in Millstone
1 as a result of the February 1999 rate decision and an earlier settlement
with the Connecticut Municipal Electric Energy Cooperative (CMEEC).  At
December 31, 1998, CL&P had unrecovered plant and related assets for
Millstone 1 of  $129.5 million and an unrecovered decommissioning obligation
of $313.5 million. These amounts have been recorded as a regulatory asset,
while decommissioning and closure obligations have been recorded as a
liability.  CL&P has been allowed to recover its remaining investment in
Millstone 1 over three years beginning October 1998.  The rate decision also
stated that CL&P would be allowed to recover its decommissioning costs and
could defer pre-decommissioning costs commencing July 1, 1999 for future
recovery.

Yankee Companies

CL&P has a 34.5 percent ownership interest in the Connecticut Yankee Atomic
Power Company (CYAPC), a 24.5 percent ownership interest in Yankee Atomic
Electric Company (YAEC), a 12 percent ownership interest in Maine Yankee
Atomic Power Company (MYAPC) and a 9.5 percent ownership interest in Vermont
Yankee Nuclear Power Corporation (VYNPC).  The nuclear plants owned by YAEC,
CYAPC and MYAPC were shut down permanently on February 26, 1992, December 4,
1996, and August 6, 1997, respectively.

At December 31, 1998, CL&P's share of its estimated remaining contract
obligations, including decommissioning, amounted to approximately $277.8
million; $20.0 million for YAEC, $172.0 million for CYAPC and $85.8 million
for MYAPC.  Under the terms of the contracts with the Yankee companies, CL&P
is responsible for its proportionate share of the costs of the units
including decommissioning.  Management expects to recover these costs from
customers.  Accordingly, CL&P has recognized these costs as a regulatory
asset, with a corresponding obligation on its balance sheet.

CL&P has exposure for its investment in CYAPC as a result of an initial
decision at the Federal Energy Regulatory Commission (FERC).  Additionally,
in January 1999, MYAPC filed an offer of settlement which, if accepted by the
FERC, will resolve all the issues in the FERC decommissioning rate case
proceeding.  CL&P management cannot predict the ultimate outcome of the FERC
proceedings at this time, but believes that the associated regulatory assets
are probable of recovery.  For further  information on these proceedings see
"Notes to Consolidated Financial Statements," Note 11B.
     
CL&P's ownership share of the estimated costs of decommissioning the nuclear
plant owned by VYNPC is approximately $50.4 million in year-end 1998 dollars.

Millstone 2, 3 and Seabrook 1

CL&P's estimated cost to decommission its shares of Millstone 2, Millstone 3
and Seabrook 1 is approximately $638 million in year-end 1998 dollars.  These
costs are being recognized over the lives of the respective units with a
portion currently being recovered through rates.  As of December 31, 1998,
the market value of the contributions already made to the decommissioning
trusts, including their investment returns, was approximately $242 million.
See the "Notes to Consolidated Financial Statements," Note 3,  for further
information on nuclear decommissioning.

Year 2000 Issues

The NU system has established an action plan by which identified processes
must be completed by certain dates in order to ensure its operating systems,
including nuclear systems, and reporting systems are able to properly
recognize the year 2000.  This action plan has three phases: the inventory
phase, the detailed assessment phase and the remediation phase. The inventory
phase, which has been completed, identified operating and reporting systems
which may need to be fixed. The detailed assessment phase, which has been
completed, determined exactly what needed to be done in order to ensure that
the systems identified during the inventory phase are able to recognize
properly and process the year 2000. The final phase is the remediation phase.
By the end of this phase, mission critical systems   (systems that are
related to safety, keeping the lights on, regulatory requirements, and other
systems that could have a significant financial impact) will be year 2000
ready; that is, these systems will perform their business functions properly
in the year 2000.  This phase includes making modifications, testing and
validating changes and verifying that the year 2000 issues have been
resolved.

Although the identification and detailed assessment phases are complete,
newly identified items, such as new software purchases, are added to the
inventory as they are identified and are subject to detailed assessment and,
if needed, remediation.  The NU system purchasing policies require newly
purchased software and devices to be year 2000 compliant. None of these
newly identified items are expected to materially impact completion of the
remediation phase.

The NU system has identified and inventoried 2,497 computer systems
(software) and over 24,000 devices (hardware) broken down into 3,450
device types containing date-sensitive computer chips.  As of December 31,
1998, 73 percent of the software systems and 81 percent of the hardware
were year 2000 ready.

The remaining items are in various stages of modification or testing.
Management anticipates the remediation phase for mission critical systems
to be completed by mid-1999.

In addition, the NU system has been contacting its key suppliers and
business partners to determine their ability to manage the year 2000
problem successfully.  The NU system is adjusting its inventories, working
with suppliers to provide backup inventories, and changing suppliers as
needed to provide for an adequate supply of materials needed to conduct
business into the year 2000.

The NU system also has worked actively with the Independent System Operator
(ISO) New England, the operator of the New England power grid and with the
North American Electric Reliability Council to provide for the year 2000
readiness of the New England power grid.

The NU system has utilized both internal and external resources to identify,
assess, test and reprogram or replace the computer systems for year 2000
readiness.  The current projected total cost of the Year 2000 Program to the
NU system is $30 million. The total estimated remaining cost is $18 million,
which is being funded through operating cash flows. The majority of these
costs will be expensed as incurred in 1999. Since 1996, the NU system has
incurred and expensed approximately $12 million related to year 2000
readiness efforts. Total expenditures related to the year 2000 are not
expected to have a material effect on the operations or financial condition
of the NU system.

The costs of the project and the date on which the NU system plans to
complete the year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources, third-
party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved, and actual results could
differ materially from those plans. If the NU system's remediation plans or
those of third parties are not successful, there could be a significant
disruption of the NU system's operations.   The most likely worst case
scenario is a limited number of localized interruptions to electric service
which can be restored within a few hours.  As a precautionary measure, the
NU system is formulating contingency plans that will evaluate alternatives
that could be implemented if our remediation efforts are not successful.
The contingency plans are being developed by enhancing existing emergency
operating procedures to include year 2000 issues.  In addition, the NU system
plans to have staff available to respond to any year 2000 situations that
might arise. The contingency plan is expected to be available by July 30,
1999.

The NU system is committed to assuring that adequate resources are available
in order to implement any changes necessary for its nuclear and other
operations to be compatible with the new millennium.

Risk-Management Instruments

The following discussion about CL&P's risk-management activities includes
forward looking statements that involve risks and uncertainties.  Actual
results could differ materially from those projected in the forward looking
statements.

This analysis presents the hypothetical loss in earnings related to the fuel
price and interest rate market risks at December 31, 1998. CL&P uses swaps
to manage the market risk exposures associated with changes in fuel prices
and variable interest rates. CL&P uses these instruments to reduce risk by
essentially creating offsetting market exposures. Based on the derivative
instruments which are currently being utilized by CL&P to hedge some of
their fuel price and interest rate risks, there will be an impact on
earnings upon adoption of Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities,
which management cannot estimate at this time.  For more information on
CL&P's use of risk-management instruments, see the "Notes to Consolidated
Financial Statements," Notes 1L and 12.

Fuel-Price Risk-Management Instruments

In the generation of electricity, the most significant segment of the
variable cost component is the cost of fuel.  Typically, most of CL&P's
fuel purchases are protected by a regulatory fuel price adjustment clause.
However, for a specific, well-defined volume of fuel that is excluded from
the fuel price adjustment clause, CL&P employs fuel-price risk-management
instruments to protect itself against the risk of rising fuel prices, thereby
limiting fuel costs and protecting its profit margins. These risks are
primarily created by the sale of long-term, fixed-price electricity
contracts to wholesale customers.

At December 31, 1998, CL&P had outstanding fuel-price management instrument
agreements with a total notional value of approximately $422 million and
a negative mark-to-market position of approximately $45 million.  A
hypothetical 10 percent decrease in average 1998 fuel prices during 1999
may result in a $10 million decrease in the fair value of the fuel-price
risk-management instruments.  Because these instruments are used to hedge
the fuel price risk created by the sale of long-term, fixed-price electricity
contracts, it is expected that the hypothetical decrease in fuel prices
during 1999 would result in a corresponding increase in the fair value of
these contracts.

This analysis is based on the assumption that the amount of fuel-price risk-
management instruments and the amount of long-term fixed-price electricity
sales contracts to wholesale customers will not fluctuate during 1999.  This
analysis is subject to change as these assumptions change.

Environmental Matters

CL&P is potentially liable for environmental cleanup costs at a number of
sites inside and outside its service territory. To date, the future estimated
environmental remediation liability has not been material with respect to the
earnings or financial position of CL&P. CL&P  had recorded an environmental
reserve of approximately $8.0 and $6.4 million, at December 31, 1998 and
1997, respectively. See the "Notes to Consolidated Financial Statements,"
Note 11D, for further information on environmental matters.


RESULTS OF OPERATIONS

                                        Income Statement Variances
                                           (Millions of Dollars)

                             1998 over/(under) 1997   1997 over/(under) 1996

                                Amount  Percent        Amount  Percent

Operating revenues              $(79)     (3)%          $ 68      3%
Fuel, purchased and net
  interchange power              (90)     (9)            146     18
Other operation                  (22)     (3)             (1)     -
Maintenance                      (84)    (24)             56     19
Depreciation                     (22)     (9)             (8)    (3)
Amortization of regulatory
  assets, net                     59      96               4      7
Federal and state income
  taxes                          (12)    (18)            (68)    (a)
Millstone 1 unrecoverable
  costs                         (143)   (100)              -      -
Other income, net                 (4)     (a)            (16)    (89)
Net loss                         (56)    (40)            (89)     (a)

(a) Percentage greater than 100.


Operating Revenues

The removal of the Millstone units from CL&P's rate base reduced revenues by
$68 million in 1998.  Wholesale revenues decreased by $33 million primarily
as a result of the terminated contract with CMEEC. These decreases were
partially offset by higher retail sales volumes. Retail kilowatt-hour sales
were 2.2 percent higher and contributed $36 million to nonfuel revenues in
1998 primarily as a result of economic growth.

Total operating revenues increased in 1997, primarily due to higher fuel
recoveries and higher conservation recoveries. Fuel recoveries increased $33
million, primarily due to higher fuel revenues as a result of a lower fuel
rate in 1996. Conservation recoveries increased by $17 million, primarily due
to a 1996 reserve for overrecoveries of demand-side management costs.

Fuel, Purchased and Net Interchange Power

The change in fuel, purchased and net interchange power expense in 1998 is
primarily due to lower replacement power costs due to the return to service
of Millstone 3.

Fuel, purchased and net interchange power expense increased in 1997,
primarily due to replacement power costs associated with the Millstone
outages.

Other Operation and Maintenance

Other operation and maintenance expenses decreased in 1998, primarily due
to lower costs at the Millstone nuclear units ($125 million), lower costs
at the Yankee nuclear units ($21 million), lower administrative and general
expenses ($12 million), the recognition of environmental insurance proceeds
($9 million), lower distribution costs ($8 million), a decrease in sales and
marketing expenses ($8 million), and lower costs from ISO New England for
interchange services ($7 million).  These decreases were partially offset
by higher capacity charges ($51 million) and the recognition of nuclear
refueling outage costs primarily as a result of the 1996 Rate Settlement
($34 million).

Other operation and maintenance expenses increased in 1997, primarily due to
higher costs associated with the Millstone restart effort ($173 million) and
higher charges from MYAPC ($9 million), partially offset by lower recognition
of nuclear refueling outage costs primarily as a result of the 1996 Rate
Settlement ($72 million), lower capacity charges from CYAPC as a result of a
property tax refund ($27 million), lower administrative and general expenses
($23 million) primarily due to lower pensions and benefit costs, and lower
storm expenses.

Depreciation

Depreciation decreased in 1998, primarily due to the retirement of Millstone 1.

Depreciation decreased in 1997, primarily due to lower depreciation rates
partially offset by higher plant balances.

Amortization of Regulatory Assets, Net

Amortization of regulatory assets, net  increased in 1998, primarily due to
accelerated amortizations in accordance with retail regulatory decisions and
the beginning of the amortization of the Millstone 1 remaining investment.

Amortization of regulatory assets, net increased in 1997, primarily due to
the completion of cogeneration deferrals in 1996 and increased amortization
in 1997, partially offset by the completion of CL&P's Seabrook amortization
in 1996.

Federal and State Income Taxes

Federal and state income taxes decreased in 1998 primarily due to lower book
taxable income and the increase in income tax credits due to the Millstone 1
write off.

Federal and state income taxes decreased in 1997 primarily due to lower book
taxable income.

Millstone 1 Unrecoverable Costs

Millstone 1 unrecoverable costs represents the write-off of the Millstone 1
entitlement formerly held by CMEEC and the write-off of unrecoverable costs
as a result of the February 1999 rate decision.

Other Income, Net

The change in other income, net in 1998 was not significant.  Other income,
net decreased in 1997, primarily due to costs associated with the sale of
accounts receivable facility and lower miscellaneous income.



The Connecticut Light and Power Company and Subsidiaries


SELECTED FINANCIAL DATA(a)

                         1998         1997       1996        1995        1994  
                                        (Thousands of Dollars)

Operating Revenues....$2,386,864  $2,465,587  $2,397,460  $2,387,069  $2,328,052

Operating Income/
  (Loss)..............    28,254     (12,399)     29,773     324,026     286,948

Net (Loss)/Income.....  (195,725)   (144,377)    (80,237)    205,216     198,288

Cash Dividends on
  Common Stock........      -          5,989     138,608     164,154     159,388

Total Assets.......... 6,050,198   6,081,223   6,244,036   6,045,631   6,217,457

Long-Term Debt (c)....      -      2,043,327   2,038,521   1,822,018   1,823,690

Preferred Stock Not
  Subject to Mandatory
  Redemption..........   116,200     116,200     116,200     116,200     166,200

Preferred Stock
  Subject to Mandatory
  Redemption(c).......   119,289     155,000     155,000     155,000     230,000

Obligations Under
  Capital Leases(c)...   162,884     158,118     155,708     172,264     175,969



STATEMENTS OF QUARTERLY FINANCIAL DATA (Unaudited)

                                         Quarter Ended(a)
1998                     March 31     June 30    September 30    December 31
                                      (Thousands of Dollars)

Operating Revenues       $608,961    $561,224      $628,148       $ 588,531

Operating Income/(Loss)  $  6,261    $ 11,066      $ 29,945       $ (19,018)

Net Loss                 $(30,979)   $(26,361)     $(20,405)      $(117,980)

1997



Operating Revenues       $624,908    $574,841      $627,712        $638,126

Operating Income/(Loss)  $ 23,148    $(33,587)     $(15,552)       $ 13,592

Net Loss                 $ (6,431)   $(64,089)     $(50,077)       $(23,780)

(a)  Reclassifications of prior data have been made to conform with the current
     presentation.

(b)  Includes the cumulative effect of change in accounting for municipal
     property tax expense, which increased earnings for common shares by
     $47.7 million.

(c)  Includes portion due within one year.



The Connecticut Light and Power Company and Subsidiaries


STATISTICS (Unaudited)

        Gross Electric                  Average
        Utility Plant                    Annual
         December 31,               Use Per Electric
        (Thousands of   kWh Sales     Residential      Customers    Employees
          Dollars)      (Millions)   Customer (kWh)    (Average)  (December 31)

1998    $6,345,215        27,356         8,476         1,113,370      2,336
1997     6,639,786        26,766         8,526         1,103,309      2,163
1996     6,512,659        26,043         8,639         1,099,340      2,194
1995     6,389,190        26,366         8,506(a)      1,094,527      2,270
1994     6,327,967        26,975         8,775         1,086,400      2,587


(a)  Effective January 1, 1996, the amounts shown reflect billed and
     unbilled sales. 1995 has been restated to reflect this change.