STATEMENT OF ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2012

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 December 31, 2012 and 2011 were as follows:

	December 31, 2012
	(In Thousands)

			Deferred Charges		Current			Noncurrent
	Current Assets		and Other Assets		Liabilities			Liabilities

Contracts for differences	$	11,671	$	67,167	$	(30,804	)	$	(224,639	)
Weather insurance contracts		1,000		-		-			-
Total derivative assets/(liabilities), gross	$	12,671	$	67,167	$	(30,804	)	$	(224,639	)

	December 31, 2011
	(In Thousands)

			Deferred Charges		Current			Noncurrent
	Current Assets		and Other Assets		Liabilities			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 years ended December 31, 2012 and 2011 were as follows:

	Year Ended
	December 31,
	2012			2011
	(In Thousands)

Regulatory Assets - Derivative assets	$	(7,500	)	$	69,397

Regulatory Liabilities - Derivative liabilities	$	12		$	5,736

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 2012, 2011 and 2010:

	Year Ended December 31,
	2012		2011		2010
	(In Thousands, except per share amounts)

Numerator:
Net income attributable to UIL Holdings	$	103,637	$	99,656	$	54,854
Less: Net income allocated to unvested units		184		210		149
Net income attributable to common shareholders	$	103,453	$	99,446	$	54,705

Denominator:
Basic average number of shares outstanding		50,831		50,609		35,722
Effect of dilutive securities		277		317		361
Diluted average number of shares outstanding		51,108		50,926		36,083

Earnings per share:
Basic	$	2.04	$	1.96	$	1.53
Diluted	$	2.02	$	1.95	$	1.52

Net Property, Plant and Equipment

UIL Holdings' property, plant and equipment as of December 31, 2012 and 2011 were comprised as follows:

	2012		2011
	(In Thousands)

Electric distribution plant	$	860,096	$	822,899
Electric transmission plant		577,669		508,738
Gas distribution plant		1,386,288		1,318,914
Software		136,219		139,241
Building and improvements		219,234		112,146
Land		64,421		64,137
Other plant		185,648		166,181
Total property, plant & equipment		3,429,575		3,132,256
Less accumulated depreciation		953,561		929,401
		2,476,014		2,202,855
Construction work in progress		311,340		367,500
Net property, plant & equipment	$	2,787,354	$	2,570,355

Regulatory Assets and Liabilities

Unless otherwise stated below, all of UIL Holdings' regulatory assets earn a return. UIL Holdings' regulatory assets and liabilities as of December 31, 2012 and 2011 included the following:

	Remaining	December 31,		December 31,
	Period	2012		2011
		(In Thousands)
Regulatory Assets:
Nuclear plant investments – above market	(a)	$	252,498	$	272,943
Connecticut Yankee	3 years		11,129		14,247
Unamortized redemption costs	9 to 21 years		12,103		12,906
Pension and other post-retirement benefit plans	(b)		458,019		344,746
Environmental remediation costs	4 to 5 years		14,772		19,101
Customer rate surcharge	(c)		-		15,757
Hardship programs	(d)		29,852		37,420
Debt premium	1 to 25 years		41,016		48,275
Deferred purchased gas	(e)		12,444		15,558
Deferred income taxes	(f)		731		20,994
Unfunded future income taxes	(f)		17,319		11,657
Contracts for differences	(g)		176,597		184,105
Excess generation service charge	(h)		8,864		13,758
Deferred transmission expense	(i)		21,379		-
Storm Costs	(j)		52,009		29,618
Other	(k)		27,449		45,037
Total regulatory assets			1,136,181		1,086,122
Less current portion of regulatory assets			118,961		102,900
Regulatory Assets, Net		$	1,017,220	$	983,222

Regulatory Liabilities:
Accumulated deferred investment tax credits	31 years	$	4,612	$	4,758
Income taxes due principally to book-tax differences	(k)		41,928		14,445
Deferred gain on sale of property	(a)		37,933		37,798
Middletown/Norwalk local transmission network service collections	37 years		21,975		22,548
Pension and other post-retirement benefit plans	1 to 8 years		15,016		17,956
Deferred income taxes	(f)		48,951		48,740
Asset retirement obligation	(l)		4,995		8,941
Low income programs	(m)		17,651		9,958
Unfunded future income taxes	(f)		125		9,735
Asset removal costs	(k)		243,854		224,125
Deferred transmission expense	(i)		-		11,628
Other	(k)		36,660		35,788
Total regulatory liabilities			473,700		446,420
Less current portion of regulatory liabilities			21,284		26,245
Regulatory Liabilities, Net		$	452,416	$	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) 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) Hardship customer accounts deferred for future recovery to the extent they exceed the amount in rates.

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

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

(g) 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); amount, which does not earn a return, is fully offset by corresponding derivative asset/liability.

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

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

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

(k) Amortization period and/or balance vary depending on the nature, cost of removal and/or remaining life of the underlying assets/liabilities; asset amount includes decoupling ($7.9 million) and certain other amounts that are not currently earning a return.

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

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