STATEMENT OF ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2011

STATEMENT OF ACCOUNTING POLICIES [Abstract]

UIL Holdings' regulatory assets and liabilities as of December 31, 2011 and 2010 included the following:

	Remaining	December 31,		December 31,
	Period	2011		2010
		(In Thousands)
Regulatory Assets:
Nuclear plant investments – above market	(a)	$	272,943	$	293,388
Income taxes due principally to book-tax differences	(b)		-		11,910
Connecticut Yankee	4 years		14,247		17,175
Unamortized redemption costs	10 to 22 years		12,906		13,708
Pension and other post-retirement benefit plans	(c)		344,746		351,610
Environmental remediation costs	4 to 5 years		19,101		17,285
Customer rate surcharge	(g)		15,757		12,816
Low income program	(h)		37,420		40,674
Debt premium	1 to 26 years		48,275		56,865
Deferred purchased gas	(i)		15,558		23,330
Deferred income taxes	(j)		20,994		5,859
Unfunded future income taxes	(j)		11,657		25,684
Contracts for differences	(d)		184,105		114,662
Excess generation service charge	(e)		13,758		8,711
Storm Costs	(l)		29,618		7,460
Other	(b)		45,037		40,600
Total regulatory assets			1,086,122		1,041,737
Less current portion of regulatory assets			102,900		115,848
Regulatory Assets, Net		$	983,222	$	925,889

Regulatory Liabilities:
Accumulated deferred investment tax credits	32 years	$	4,758	$	4,905
Income taxes due principally to book-tax differences	(b)		14,445		-
Deferred gain on sale of property	(a)		37,798		37,798
Middletown/Norwalk local transmission network service collections	39 years		22,548		23,121
Pension and other post-retirement benefit plans	4 to 8 years		17,956		33,685
Deferred income taxes	(j)		48,740		29,793
Asset retirement obligation	(k)		8,941		5,690
Deferred purchased gas	(i)		-		8,217
Unfunded future income taxes	(j)		9,735		163
Asset removal costs	(b)		224,125		219,121
Deferred transmission expense	(f)		11,628		27,036
Other	(b)		45,746		46,438
Total regulatory liabilities			446,420		435,967
Less current portion of regulatory liabilities			26,245		53,601
Regulatory Liabilities, Net		$	420,175	$	382,366

(a) Asset/Liability relates to the Competitive Transition Assessment (CTA). Total CTA costs recovery is currently projected to be completed in 2015, with stranded cost amortization expected to end in 2013. The remaining balances will be fully offset by amounts primarily included in income taxes due principally to book-tax differences.

(b) Amortization period and/or balance vary depending on the nature, cost of removal and/or remaining life of the underlying assets/liabilities.

(c) Asset life is dependent upon timing of final pension plan distribution; balance is recalculated each year in accordance with ASC 715 "Compensation-Retirement Benefits" (Note G).

(d) Asset life is equal to delivery term of related contracts (which vary from approximately 9 - 16 years); balance fluctuates based upon quarterly market analysis performed on the related derivatives (Note K).

(e) Working capital allowance for generation service charge; this amount fluctuates based upon cash inflows and outflows in a given period.

(f) Regulatory asset or liability which defers transmission income or expense and fluctuates based upon actual revenues and revenue requirements.

(g) Deferral of revenue received for excess refund of overearnings to be recovered over 2 - 3 years.

(h) Various hardship and payment plan programs approved for recovery.

(i) Deferred purchase gas costs balances at the end of the rate year are normally recorded/returned in the next year.

(j) The balance will be extinguished when the asset or liability has been realized or settled, respectively.

(k) The liability will be extinguished simultaneous with the retirement of the assets and settlement of the corresponding asset retirement obligation.

(l) Storm costs include accumulated costs for major storms occurring from January 2009 forward. UI will seek recovery of these costs in future rate proceedings.

Fair Value of Gross Derivative Assets and Liabilities

The fair value of the gross derivative assets and liabilities as of December 31, 2011 and 2010 were as follows:

	December 31, 2011
	(In Thousands)

	Current Assets		Deferred Charges and Other Assets		Current Liabilities			Noncurrent Liabilities

Derivative assets/(liabilities), gross	$	14,189	$	73,264	$	(28,888	)	$	(239,147	)

	December 31, 2010
	(In Thousands)


	Current Assets		Deferred Charges and Other Assets		Current Liabilities			Noncurrent Liabilities

Derivative assets/(liabilities), gross	$	6,057	$	28,131	$	(13,246	)	$	(129,560	)

Unrealized Gains and Losses From Mark-To-Market Adjustments

The unrealized gains and losses from mark-to-market adjustments to derivatives recorded in regulatory assets or regulatory liabilities for the years ended December 31, 2011 and 2010 were as follows:

	Year Ended
	December 31,
	2011		2010
	(In Thousands)

Regulatory Assets - Derivative assets	$	69,397	$	(23,022	)

Regulatory Liabilities - Derivative liabilities	$	5,736	$	584

Net Property, Plant, and Equipment

UIL Holdings' property, plant and equipment as of December 31, 2011 and 2010 were comprised as follows:

	2011		2010
	(In Thousands)

Electric distribution plant	$	845,252	$	777,916
Electric transmission plant		549,995		489,223
Gas distribution plant		1,318,917		1,275,133
Software		139,241		129,202
Land		42,625		39,008
Other plant		236,226		233,741
Total property, plant & equipment		3,132,256		2,944,223
Less accumulated depreciation		929,401		859,461
		2,202,855		2,084,762
Construction work in progress		367,500		242,688
Net property, plant & equipment	$	2,570,355	$	2,327,450

Reconciliation of Basic and Diluted Earnings Per Share

The following table presents a reconciliation of the basic and diluted earnings per share calculations for the years 2011, 2010 and 2009:

	Year Ended December 31,
	2011		2010		2009
	(In Thousands, except per share amounts)

Numerator:
Net income attributable to UIL Holdings	$	99,656	$	54,854	$	54,317
Less: Net income allocated to unvested units		210		149		84
Net income attributable to common shareholders	$	99,446	$	54,705	$	54,233

Denominator:
Basic average number of shares outstanding		50,609		35,722		28,027
Effect of dilutive securities		317		361		246
Diluted average number of shares outstanding		50,926		36,083		28,273

Earnings per share:
Basic	$	1.96	$	1.53	$	1.94
Diluted	$	1.95	$	1.52	$	1.93

- Definition

Tabular disclosure of the useful life and salvage value of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software.

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- Definition

Tabular disclosure of the location and amount of gains and losses reported in the statement of financial performance, or when applicable, the statement of financial position. For example, (a) gains and losses recognized in the income statement on derivative instruments designated and qualifying as hedging instruments in fair value hedges and related hedged items designated and qualifying in fair value hedges and (b) gains and losses initially recognized in other comprehensive income on derivative instruments designated and qualifying as cash flow hedges.

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- Definition

Tabular disclosure of the location and fair value amounts of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments) reported in the statement of financial position.

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