BUSINESS ORGANIZATION AND STATEMENT OF ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2012

BUSINESS ORGANIZATION AND STATEMENT OF ACCOUNTING POLICIES [Abstract]

Fair Value of Gross Derivative Assets and Liabilities

UIL Holdings' regulated subsidiaries are parties to contracts, and involved in transactions, that are derivatives.  The fair values of the gross derivative assets and liabilities as of June 30, 2012 and December 31, 2011 were as follows:

	June 30, 2012
	(In Thousands)
	Current Portion		Noncurrent Portion		Current Portion			Noncurrent Portion
	Derivative Assets		Derivative Assets		Derivative Liabilities			Derivative Liabilities
Contracts for differences	$	11,410	$	70,161	$	(30,332	)	$	(229,563	)
Weather insurance contracts		1,000		-		-			-
Total derivative assets/(liabilities), gross	$	12,410	$	70,161	$	(30,332	)	$	(229,563	)

	December 31, 2011
	(In Thousands)
	Current Portion		Noncurrent Portion		Current Portion			Noncurrent Portion
	Derivative Assets		Derivative Assets		Derivative Liabilities			Derivative Liabilities
Contracts for differences	$	10,678	$	73,264	$	(28,888	)	$	(239,147	)
Weather insurance contracts		3,511		-		-			-
Total derivative assets/(liabilities), gross	$	14,189	$	73,264	$	(28,888	)	$	(239,147	)

Unrealized Gains and Losses From Mark-To-Market Adjustments

The unrealized gains and losses from fair value adjustments to these derivatives recorded in regulatory assets or regulatory liabilities for the three and six month periods ended June 30, 2012 and 2011 were as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2012		2011			2012			2011
	(In Thousands)					(In Thousands)
Regulatory Assets - Derivative liabilities	$	2,167	$	30,375		$	(5,781	)	$	70,536
Regulatory Liabilities - Derivative assets	$	40	$	(584	)	$	12		$	5,748

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 three and six month periods ended June 30, 2012 and 2011:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In Thousands, except per share amounts)
Numerator:
Net income attributable to UIL Holdings	$	11,999	$	14,156	$	59,049	$	66,200
Less:  Net income allocated to unvested units		18		29		105		143
Net income attributable to common shareholders	$	11,981	$	14,127	$	58,944	$	66,057
Denominator:
Basic average number of shares outstanding		50,793		50,628		50,740		50,574
Effect of dilutive securities		248		244		262		250
Diluted average number of shares outstanding		51,041		50,872		51,002		50,824
Earnings per share:
Basic	$	0.24	$	0.28	$	1.16	$	1.31
Diluted	$	0.23	$	0.28	$	1.16	$	1.30

Regulatory Assets and Liabilities

UIL Holdings' regulatory assets and liabilities as of June 30, 2012 and December 31, 2011 included the following:

	Remaining	June 30,		December 31,
	Period	2012		2011
		(In Thousands)
Regulatory Assets:
Nuclear plant investments - above market	(a)	$	262,720	$	272,943
Connecticut Yankee	4 years		12,718		14,247
Unamortized redemption costs	9 to 21 years		12,505		12,906
Pension and other post-retirement benefit plans	(c)		336,656		344,746
Environmental remediation costs	4 to 5 years		19,354		19,101
Customer rate surcharge	(g)		10,032		15,757
Low income program	(h)		29,003		37,420
Debt premium	1 to 26 years		44,925		48,275
Deferred purchased gas	(i)		-		15,558
Deferred income taxes	(j)		29,279		20,994
Unfunded future income taxes	(j)		9,958		11,657
Contracts for differences	(d)		178,322		184,105
Excess generation service charge	(e)		16,035		13,758
Deferred transmission income/expense	(f)		10,650		-
Storm Costs	(l)		26,088		29,618
Other	(b)		39,733		45,037
Total regulatory assets			1,037,978		1,086,122
Less current portion of regulatory assets			123,007		102,900
Regulatory Assets, Net		$	914,971	$	983,222
Regulatory Liabilities:
Accumulated deferred investment tax credits	32 years	$	4,685	$	4,758
Income taxes due principally to book-tax differences	(b)		19,628		14,445
Deferred gain on sale of property	(a)		37,798		37,798
Middletown/Norwalk local transmission network service collections	38 years		22,261		22,548
Pension and other post-retirement benefit plans	1 to 8 years		14,836		17,956
Deferred income taxes	(j)		36,247		48,740
Asset retirement obligation	(k)		8,455		8,941
Deferred purchased gas	(i)		10,787		-
Low income program	(h)		14,782		-
Unfunded future income taxes	(j)		20,534		9,735
Asset removal costs	(b)		233,527		224,125
Deferred transmission income/expense	(f)		-		11,628
Other	(b)		35,828		45,746
Total regulatory liabilities			459,368		446,420
Less current portion of regulatory liabilities			28,597		26,245
Regulatory Liabilities, Net		$	430,771	$	420,175

(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 7 - 15 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, recovery of which will be complete by November 2012.

(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.