(K)	FAIR VALUE MEASUREMENTS

As required by ASC 820 “Fair Value Measurements and Disclosures,” 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 other postretirement benefits, at fair value on a recurring basis as of June 30, 2013 and December 31, 2012.

	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
June 30, 2013	(In Thousands)
Assets:
Derivative assets	$	-	$	-		$	58,700		$	58,700
Noncurrent investments available for sale		10,322		-			-			10,322
Deferred Compensation Plan		3,516		-			-			3,516
Supplemental retirement benefit trust life insurance policies		-		6,953			-			6,953
	$	13,838	$	6,953		$	58,700		$	79,491

Liabilities:
Derivative liabilities	$	-	$	-		$	212,042		$	212,042
Long-term debt		-		1,790,907			-			1,790,907
	$	-	$	1,790,907		$	212,042		$	2,002,949

Net fair value assets/(liabilities), June 30, 2013	$	13,838	$	(1,783,954	)	$	(153,342	)	$	(1,923,458	)

December 31, 2012
Assets:
Derivative assets	$	-	$	-		$	79,838		$	79,838
Noncurrent investments available for sale		9,902		-			-			9,902
Deferred Compensation Plan		3,745		-			-			3,745
Supplemental retirement benefit trust life insurance policies		-		6,438			-			6,438
	$	13,647	$	6,438		$	79,838		$	99,923

Liabilities:
Derivative liabilities	$	-	$	-		$	255,443		$	255,443
Long-term debt		-		1,886,440			-			1,886,440
	$	-	$	1,886,440		$	255,443		$	2,141,883

Net fair value assets/(liabilities), December 31, 2012	$	13,647	$	(1,880,002	)	$	(175,605	)	$	(2,041,960	)

The derivative assets and liabilities consist primarily of CfDs and weather insurance contracts. The determination of fair value of the CfDs was based on a probability-based expected cash flow analysis that was discounted at the June 30, 2013 or December 31, 2012 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. For information regarding the determination of the fair value of the weather insurance contracts, see Note (A) “Business Organization and Statement of Accounting Policies – Derivatives.” Additional quantitative information about Level 3 fair value measurements is as follows:

	Unobservable Input	Range


Contracts for differences	Risk of non-performance	0.00% - 1.03%
	Discount rate	1.96% - 2.70%
	Forward pricing ($ per MW)	$1.40 - $9.83

Significant isolated changes in the risk of non-performance, the discount rate or the contract term pricing would result in an inverse change in the fair value of the CfDs.

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 CfDs are fully recoverable. As a result, such changes have no impact on UIL Holdings’ net income.

The determination of the fair value of the supplemental retirement benefit trust life insurance policies was based on quoted prices as of June 30, 2013 and December 31, 2012 in the active markets for the various funds within which the assets are held.

Fair value of long-term debt is based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes of new issue prices and relevant credit 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 six-month period ended June 30, 2013.

	Six Months Ended
	June 30, 2013

Net fair value assets/(liabilities), December 31, 2012	$	(175,605	)

Unrealized gains and (losses), net Included in regulatory assets/(liabilities)		23,263
Settlements		(1,000	)
Net fair value assets/(liabilities), June 30, 2013	$	(153,342	)

Change in unrealized gains (losses), net relating to net fair value assets/(liabilities), still held as of June 30, 2013	$	23,263

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 CfDs for the six-month period ended June 30, 2013. The amounts offset the net CfDs liabilities included in the derivative liabilities detailed above.

	Six Months Ended
	June 30, 2013
	(In Thousands)

Net regulatory assets/(liabilities), December 31, 2012	$	176,605
Unrealized (gains) and losses, net		(23,263	)
Net regulatory assets/(liabilities), June 30, 2013	$	153,342