(C)	REGULATORY PROCEEDINGS

On August 1, 2012, PURA issued a final decision in its investigation of the service response and communications of utilities, including UI, CNG and SCG, after Tropical Storm Irene, which passed through Connecticut in August 2011, and the autumn nor'easter, which passed through Connecticut in October 2011. The decision contains reporting requirements for UI (with respect to various recommendations, improving mutual assistance, and release of customer information in emergency situations) and CNG and SCG (with respect to a fueling plan and lessons learned).

On January 9, 2012, a panel formed by Connecticut Governor Malloy issued its "Report of the Two Storm Panel" (the Report). The Report considered areas such as (i) utility preparedness, tree trimming and infrastructure hardening, (ii) communications and information sharing, and (iii) municipal matters such as preparedness, road safety and shelter operations. The Report also makes a number of recommendations with respect to emergency preparedness in the State of Connecticut. UIL Holdings is unable to assess if any of the recommendations related to Connecticut's utilities will be implemented in the future, but expects any costs associated with any related legislative or regulatory action to be fully recoverable.

On June 18, 2012, pursuant to Connecticut law PA 11-80, PURA initiated a docket for the establishment of performance standards for electric distribution and gas companies. PA 11-80 requires PURA to, among other things, establish industry specific standards, review service restoration practices, and establish standards for acceptable performance in an emergency in which more than 10% of any utility's customers are without service for more than 48 hours. PURA is required to submit a report to the General Assembly no later than November 1, 2012 identifying the standards established and recommendations for legislative changes necessary to implement the standards.

Electric Distribution and Transmission

Rates

UI's allowed distribution return on equity established by PURA is 8.75%. UI has an earnings sharing mechanism in place that allows the Company to retain 50% of any distribution earnings above the allowed 8.75% ROE in a calendar year.

UI filed its revised distribution 2011 rate year decoupling results with PURA on June 29, 2012. The decoupling results included a decoupling adjustment of approximately $4.4 million which is to be collected from customers beginning in the fourth quarter of 2012, pending PURA approval. PURA is expected to issue a decision on the decoupling adjustment in the third quarter of 2012. Additionally, PURA approved last resort service Generation Services Charge rates for the period through September 30, 2012.

Approval for the Issuance of Debt

UI has PURA approval for the issuance of up to $379 million principal amount of debt securities from 2010 through 2013 (the Proposed Notes). The proceeds from the sales of the Proposed Notes may be used by UI for the following purposes: (1) to finance capital expenditures; (2) the repayment, in July 2011, of the equity bridge loan, the proceeds of which were used to finance UI's equity contribution in GenConn for the development and construction of GenConn Devon and GenConn Middletown; (3) to fund UI's pension plan; (4) to partially repay short-term borrowings that are incurred to temporarily fund the preceding needs; (5) to pay for issuance costs related to the Proposed Notes; (6) to repay $103.5 million principal amount outstanding of pollution control revenue bonds, which were remarketed in the municipal bond market in February 2012, and (7) for general corporate purposes. UI has issued $303.5 million principal amount of senior unsecured notes pursuant to such PURA approval, $100 million of which were issued in July 2010, $103.5 million of which were issued in January 2012 and $100 million of which were issued in April 2012.

Power Supply Arrangements

UI has wholesale power supply agreements in place for the supply of all of its standard service customers for all of 2012 and 70% of 2013. Supplier of last resort service is procured on a quarterly basis. UI's contracts for standard service and supplier of last resort service are derivatives under ASC 815 "Derivatives and Hedging" and it elected the "normal purchase, normal sale" exception under ASC 815 "Derivatives and Hedging." As such, UI regularly assesses the accounting treatment for its power supply contracts. These wholesale power supply agreements contain default provisions that include required performance assurance, including certain collateral obligations, in the event that UI's credit rating on senior debt was to fall below investment grade. In October 2011, Moody's Investor Services released its updated credit opinion for UI and maintained its Baa2 rating with a stable outlook. In May 2012, Standard & Poors' Investor Services released its updated credit opinion for UI, maintaining its BBB rating with a stable outlook. If UI's credit rating were to decline one rating and UI were to be placed on negative credit watch, monthly amounts due and payable to the power suppliers would be accelerated to semi-monthly payments. UI's credit rating would have to decline two ratings to fall below investment grade at either rating service. If this were to occur, UI would have to deliver collateral security in an amount equal to the receivables due to the sellers for the thirty-day period immediately preceding the default notice. If such a situation had been in effect as of June 30, 2012, UI would have had to post approximately $9.3 million in collateral.

New Renewable Source Generation

Under Connecticut law, electric distribution companies were required to enter into contracts to purchase the output of new renewable generation totaling at least 150 MW, at prices and upon terms approved by PURA in accordance with statutory requirements. PURA approved a number of these projects from 2007 through 2009, all of which are governed by a cost sharing agreement with CL&P whereby UI pays approximately 20% of the costs and obtains approximately 20% of the benefits of such contracts. UI was a direct party to two of the contracts. UI's costs associated with all such contracts are recoverable, whether UI is a direct party or pursuant to the sharing agreement. On September 7, 2011, PURA issued a report to the legislature stating that, of the original 150 MW, only 47 MW have the capability of achieving commercial operation within contractual deadlines. One of the contracts to which UI was a direct party has since been terminated. Many of the other contracts are also expected to be terminated as the commercial operation deadlines expire.

Under a 2011 Connecticut law (PA 11-80), UI and CL&P are required to enter into long-term contracts to purchase Renewable Energy Credits (RECs) from new facilities installed behind distribution customer meters. Under this program, UI will be required to enter into contracts totaling approximately $200 million in commitments over an approximate 21 year period. The obligations will phase in over a six year solicitation period, and are expected to peak at an annual commitment level of about $13.6 million/year after six years. The cost of the contracts is expected to be partially mitigated through the resale of the RECs. PA 11-80 provides that the remaining costs of the contracts are recoverable through electric rates. In December 2011, UI and CL&P submitted a joint petition to PURA outlining a plan to address the new requirements. PURA approved the program in a final decision on April 4, 2012 and UI and CL&P then requested proposals, which were received on June 12, 2012. UI is currently evaluating proposals and anticipates executing several contracts in the third quarter of 2012.

PA 11-80 also allows for the development of 30 MW of grid-connected renewable energy. UI & CL&P are each allowed to develop projects capable of generating up to 10 MW and the Department of Energy and Environmental Protection (DEEP) is to solicit proposals for projects capable of generating 10 MW. In December 2011, DEEP announced that it had selected two 5 MW solar projects in CL&P service territory. CL&P has executed contracts with the developers of the two 5 MW solar projects to purchase energy and associated products from both projects, and such contracts have been filed with PURA for approval. UI and CL&P executed a sharing arrangement, pursuant to which UI will pay 20% of the costs, and receive 20% of the revenues, associated with the projects. Pursuant to PA 11-80, the costs of payments made to projects are recoverable through electric rates. On January 18, 2012, UI filed a proposal with PURA outlining a framework for approval of UI's renewable connections program under which UI would develop up to 10 MW of renewable generation for recovery on a cost of service basis. PURA issued a final decision on July 18, 2012, in which it approved the construction of one solar facility and two fuel cell facilities. The decision approves a return on equity (ROE) equal to the then currently allowed distribution ROE over the life of the investment, which is currently 8.75%. UI had requested a ROE of 9.5% for the renewable connections program projects. UI's participation in the program is voluntary and UI is currently assessing whether or not it will participate in the program.

New England East-West Solution

Pursuant to an agreement with CL&P (the Agreement), UI has the right to invest in, and own transmission assets associated with, the Connecticut portion of CL&P's New England East West Solution (NEEWS) projects to improve regional energy reliability. NEEWS consists of four inter-related transmission projects being developed by subsidiaries of Northeast Utilities (NU), the parent company of CL&P, in collaboration with National Grid USA. Three of the projects have portions located in Connecticut: (1) the Greater Springfield Reliability Project, (2) the Interstate Reliability Project and (3) the Central Connecticut Reliability Project. In December 2011, CL&P submitted an application to the Connecticut Siting Council seeking siting approval of the Interstate Reliability Project.

Under the terms of the Agreement, UI has the option to make quarterly deposits to CL&P in exchange for ownership of specific transmission assets as they are placed in service. UI has the right to invest up to the greater of $60 million or an amount equal to 8.4% of CL&P's costs for the Connecticut portions of the NEEWS projects. Based upon the current projected costs, this amount is approximately $60 million. As assets are placed in service, CL&P will transfer title to certain transmission assets to UI in proportion to its investments, but CL&P will continue to maintain these portions of the transmission system pursuant to an operating and maintenance agreement with UI. Also, under the terms of the Agreement, there are certain circumstances under which CL&P can terminate the Agreement. Such termination would have no effect on the assets previously transferred to UI.

Through June 30, 2012, UI has made deposits totaling $13.0 million in NEEWS and expects to make the remaining deposits over a period of three to five years, depending on the timing and amount of CL&P's capital expenditures and the projects' in service dates. UI earned pre-tax income of approximately $0.4 million and $0.7 million on such deposits in the three and six month periods ended June 30, 2012, respectively.

On June 20, 2012, NU, on behalf of CL&P, submitted for filing, the operation and maintenance agreement (O&M Agreement) between UI and CL&P to the FERC. Under the O&M Agreement, CL&P will serve as a contractor to manage, operate and maintain transmission assets in Connecticut that the FERC has authorized UI to acquire from CL&P. CL&P and UI plan to transfer portions of such assets from CL&P to UI by the end of 2012, which will trigger the effective date of the O&M Agreement.

Equity Investment in Peaking Generation

UI is a 50-50 joint venturer with NRG in GenConn, which was chosen by PURA to build and operate two new peaking generation plants to help address Connecticut's need for power generation during the heaviest load periods. The two new peaking generation projects, GenConn Devon and GenConn Middletown, are both operating in the ISO-New England markets. GenConn filed a rate case request with PURA on July 27, 2012, seeking approval of 2013 revenue requirements for the annual period commencing January 1, 2013 for both the GenConn Devon and GenConn Middletown facilities. A final decision on this request is expected by the end of 2012.

Transmission Return on Equity (ROE)

PURA decisions do not affect the revenue requirements determination for transmission, including the applicable return on equity (ROE), which are within the jurisdiction of the FERC. For 2012, UI is estimating an overall allowed weighted-average ROE for its transmission business in the range of 12.2% to 12.4%.

In September 2011, several New England governmental entities, including PURA, the Connecticut Attorney General and the Connecticut Office of Consumer Counsel, filed a complaint with the FERC against ISO-NE and several New England transmission owners, including UI, claiming that the current approved base ROE on transmission investments of 11.14% is not just and reasonable and seeking a reduction of the base ROE to 9.20%. The New England transmission owners filed their response to the complaint in October 2011, opposing any change to the base ROE as unsupported. In May 2012, the FERC issued an order setting the matter for hearing and establishing settlement procedures. Settlement proceedings have terminated, and a hearing judge has been assigned. A FERC order would be expected to be issued in 2013. UI is unable to predict the outcome at this time. A 25 basis point change in the weighted-average ROE for UI's transmission business would change net income by approximately $0.6 million annually, for example. In the event there is a reduction to the ROE, the May order established a refund effective date of October 1, 2011.

Gas Distribution

Rates

The allowed returns on equity established by PURA are 9.41% and 9.36% for CNG and SCG, respectively. Berkshire's rates are established by the DPU. Berkshire's 10-year rate plan, which was approved by the DPU, expired on January 31, 2012. The ROE approved in Berkshire's rate plan is 10.5%. Berkshire is currently assessing what action, if any, should be taken and continues to charge the rates that were in effect at the end of the rate plan.

Approval for the Issuance of Debt

On June 6, 2012, Berkshire filed a petition with the DPU for the approval to issue, from time to time, long-term debt in an aggregate principal amount not to exceed $20 million through a period ending December 14, 2014. The proceeds from such debt issuances may be used by Berkshire for the following purposes: (1) to finance capital expenditures; (2) to refinance short-term debt; (3) to pay anticipated environmental expenditures; (4) to provide general working capital; and (5) any other purposes as the DPU may authorize. Berkshire proposes to issue long-term debt with maturities up to 30 years and to issue secured or unsecured securities or to execute a bank financing. A decision is expected in the fourth quarter of 2012.