FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2010

(K) FAIR VALUE MEASUREMENTS

UIL Holdings utilizes an income approach valuation technique to value the majority of its assets and liabilities measured and reported at fair value. As required by ASC 820, financial assets and liabilities are classified in their entirety, based on the lowest level of input that is significant to the fair value measurement. UIL Holdings' assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The following tables set forth UIL Holdings' financial assets and liabilities, other than pension benefits and OPEB, which were accounted for at fair value on a recurring basis as of December 31, 2011 and December 31, 2010.

	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total
December 31, 2011	(In Thousands)
Assets:
Derivative assets	$	-	$	-	$	87,454		$	87,454
Noncurrent investments available for sale		9,152		-		-			9,152
Deferred Compensation Plan		3,739		-		-			3,739
Supplemental retirement benefit trust life insurance policies (Note G)		-		5,655		-			5,655
	$	12,891	$	5,655	$	87,454		$	106,000

Liabilities:
Derivative liabilities	$	-	$	-	$	268,035		$	268,035

Net fair value assets/(liabilities), December 31, 2011	$	12,891	$	5,655	$	(180,581	)	$	(162,035	)

	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total
December 31, 2010	(In Thousands)
Assets:
Derivative assets	$	-	$	-	$	34,188		$	34,188
Noncurrent investments available for sale		9,774		-		-			9,774
Deferred Compensation Plan		3,725		-		-			3,725
Supplemental retirement benefit trust life insurance policies (Note G)		-		5,665		-			5,665
	$	13,499	$	5,665	$	34,188		$	53,352

Liabilities:
Derivative liabilities	$	-	$	-	$	142,806		$	142,806

Net fair value assets/(liabilities), December 31, 2010	$	13,499	$	5,665	$	(108,618	)	$	(89,454	)

The determination of fair value of the derivative assets and liabilities, which primarily consist of contracts for differences, was based on a probability-based expected cash flow analysis that was discounted at the December 31, 2011 or December 31, 2010 risk-free interest rates, as applicable, and an adjustment for non-performance risk using credit default swap rates. Certain management assumptions were required, including development of pricing that extended over the term of the contracts. In addition, UIL performed an assessment of risks related to obtaining regulatory, legal and siting approvals, as well as obtaining financing resources and ultimately attaining commercial operation. PURA has determined that changes in fair value associated with the contracts for differences are fully recoverable. As a result, such changes have no impact on UIL Holdings' net income.

The fair value of the noncurrent investments available for sale is determined using quoted market prices in active markets for identical assets. The investments primarily consist of money market funds.

Under the UIL Deferred Compensation Plan (DCP), directors, named executive officers and certain other executives may elect to defer certain elements of compensation. Participants in the DCP are permitted to direct investments of their elective deferral accounts into “deemed” investments consisting of mutual funds and UIL Holdings common stock equivalents. These investments, which are actively traded in sufficient frequency and volume to provide pricing information on an ongoing basis, are marked-to-market in accordance with ASC 815 based upon such pricing information.

The following tables set forth a reconciliation of changes in the fair value of the assets and liabilities above that are classified as Level 3 in the fair value hierarchy for the twelve month periods ended December 31, 2011 and 2010.

	Year Ended
	December 31, 2011
	(In Thousands)

Net derivative assets/(liabilities), December 31, 2010	$	(108,618	)
Unrealized gains and (losses), net
Included in earnings		3,090
Included in other comprehensive income		64
Included in regulatory assets/(liabilities)		(75,117	)
Net derivative assets/(liabilities), December 31, 2011	$	(180,581	)


Change in unrealized gains (losses), net relating to net derivative assets/(liabilities), still held as of December 31, 2011	$	(71,963	)

	Year Ended
	December 31, 2010
	(In Thousands)

Net derivative assets/(liabilities), December 31, 2009	$	(131,399	)
Acquired derivatives, November 17, 2010		412
Unrealized gains and (losses), net
Included in earnings		(100	)
Included in other comprehensive income		46
Included in regulatory assets/(liabilities)		22,423
Net derivative assets/(liabilities), December 31, 2010	$	(108,618	)


Change in unrealized gains (losses), net relating to net derivative assets/(liabilities), still held as of December 31, 2010	$	22,368

The following table sets forth a reconciliation of changes in the net regulatory asset/(liability) balances that were established to recover any unrealized gains/(losses) associated with the contracts for differences for the years ended December 31, 2011 and 2010. The amounts offset the net contract for differences liabilities included in the derivative liabilities detailed above.

	Year Ended
	December 31, 2011
	(In Thousands)

Net regulatory assets/(liabilities), December 31, 2010	$	108,976
Unrealized (gains) and losses, net		75,117
Net regulatory assets/(liabilities), December 31, 2011	$	184,093

The following tables set forth the fair values of UIL Holdings' pension and OPEB assets that were accounted for at fair value on a recurring basis as of December 31, 2011 and 2010.

	Year Ended
	December 31, 2010
	(In Thousands)

Net regulatory assets/(liabilities), December 31, 2009	$	131,399
Unrealized (gains) and losses, net		(22,423	)
Net regulatory assets/(liabilities), December 31, 2010	$	108,976

	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
December 31, 2011	(In Thousands)

Pension assets
Cash and cash equivalents	$	27,204	$	-	$	-	$	27,204
Mutual funds		-		520,917		-		520,917
Hedge fund		-		-		-		-
		27,204		520,917		-		548,121
OPEB assets
Mutual funds		37,572		-		-		37,572
		37,572		-		-		37,572

Fair value of plan assets, December 31, 2011	$	64,776	$	520,917	$	-	$	585,693

	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
December 31, 2010	(In Thousands)

Pension assets
Mutual funds	$	257,238	$	244,699	$	-	$	501,937
Hedge fund		-		-		390		390
		257,238		244,699		390		502,327
OPEB assets
Mutual funds		40,762		-		-		40,762
		40,762		-		-		40,762

Fair value of plan assets, December 31, 2010	$	298,000	$	244,699	$	390	$	543,089

The determination of fair value of the Level 1 and Level 2 pension and OPEB assets was based on quoted prices, as of December 31, 2011 and 2010, in the active markets for the various funds within which the assets are held. The determination of fair value of the Level 3 pension assets was based on the Net Asset Value (NAV) provided by the managers of the underlying fund investments. The NAV provided by the managers typically reflect the fair value of each underlying fund investment, including unrealized gains and losses. Changes in the fair value of pension benefits and OPEB are accounted for in accordance with ASC 715 Compensation – Retirement Benefits as discussed in Note (G) “Pension and Other Benefits”.

The following tables set forth a reconciliation of changes in the fair value of the assets above that are classified as Level 3 in the fair value hierarchy for the twelve month periods ended December 31, 2011 and 2010.

	Year Ended
	December 31, 2011
	(In Thousands)
Pension assets-Level 3, December 31, 2010	$	390
Unrealized gains and (losses), net		2,889
Realized gains and (losses), net		(2,895	)
Purchases		-
Settlements		(384	)
Pension assets-Level 3, December 31, 2011	$	-


Change in unrealized gains (losses), net relating to pension assets still held as of December 31, 2011	$	2,889

	Year Ended
	December 31, 2010
	(In Thousands)

Pension assets-Level 3, December 31, 2009	$	3,476
Unrealized gains and (losses), net		(919	)
Realized gains and (losses), net		(835	)
Sales		(1,332	)
Pension assets-Level 3, December 31, 2010	$	390


Change in unrealized gains (losses), net relating to pension assets still held as of December 31, 2010	$	(919	)

- Definition

Tabular disclosure of the fair value measurement of assets and liabilities which includes [financial] instruments measured at fair value that are classified in stockholders' equity. Such assets and liabilities may be measured on a recurring or nonrecurring basis. The disclosures which may be required or desired include: (1) for assets and liabilities measured on a recurring basis, disclosure may include: (a) the fair value measurements at the reporting date; (b) the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3); (c) for fair value measurements using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (ii) purchases, sales, issuances, and settlements (net); (iii) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs); (d) the amount of the total gains or losses for the period in subparagraph (c) (i) above included in earnings (or changes in net assets) that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date and a description of where those unrealized gains or losses are reported in the statement of income (or activities); (e) the valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques, if any, during the period and (2) for assets and liabilities that are measured at fair value on a nonrecurring basis (for example, impaired assets) disclosure may include, in addition to (a) above: (a) the reasons for the fair value measurements recorded; (b) the same as (b) above; (c) for fair value measurements using significant unobservable inputs (Level 3), a description of the inputs and the information used to develop the inputs; and (d) the valuation technique(s) used to measure fair value and a discussion of changes, if any, in the valuation technique(s) used to measure similar assets and/or liabilities in prior periods. Where the quoted price in an active market for the identical liability is not available, the Level 1 input is the quoted price of an identical liability when traded as an asset.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19279-110258

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 33

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 10

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 5

-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 6

-Footnote 4

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19190-110258

+ Details