FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2013

FAIR VALUE MEASUREMENTS [Abstract]

Fair Value of Financial Assets and Liabilities

The following tables set forth the fair value of UIL Holdings’ financial assets and liabilities, other than pension benefits and other postretirement benefits, as of September 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
September 30, 2013	(In Thousands)
Assets:
Derivative assets	$	-	$	-		$	54,822		$	54,822
Noncurrent investments available for sale		10,725		-			-			10,725
Deferred Compensation Plan		3,604		-			-			3,604
Supplemental retirement benefit trust life insurance policies		-		7,317			-			7,317
	$	14,329	$	7,317		$	54,822		$	76,468
Liabilities:
Derivative liabilities	$	-	$	-		$	202,577		$	202,577
Long-term debt		-		1,757,983			-			1,757,983
	$	-	$	1,757,983		$	202,577		$	1,960,560
Net fair value assets/(liabilities), September 30, 2013	$	14,329	$	(1,750,666	)	$	(147,755	)	$	(1,884,092	)

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	)

Additional Quantitative Information about Level 3 Fair Value Measurements

Fair value measurements categorized in Level 3 of the fair value hierarchy are prepared by individuals with expertise in valuation techniques, pricing of energy and energy-related products, and accounting requirements.  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 September 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.  UIL Holdings believes this methodology provides the most reasonable estimates of the amount of future discounted cash flows associated with the CfDs.  Additionally, on a quarterly basis, analytics are performed to ensure that the fair value of the derivatives is consistent with changes, if any, in the various fair value model inputs.  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		0.33% - 0.92	%
	Discount rate		2.02% - 2.83	%
	Forward pricing ($ per MW)	$	1.40 - $9.83

Changes in Fair Value of Assets and Liabilities Classified as level 3

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 nine-month period ended September 30, 2013.

	Nine Months Ended September 30, 2013
	(In Thousands)
Net fair value assets/(liabilities), December 31, 2012	$	(175,605	)
Unrealized gains and (losses), net
Included in regulatory assets/(liabilities)		28,850
Settlements		(1,000	)
Net fair value assets/(liabilities), September 30, 2013	$	(147,755	)
Change in unrealized gains (losses), net relating to net fair value
assets/(liabilities), still held as of September 30, 2013	$	28,850

Change in Regulatory Asset/(Liability) Balance

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

	Nine Months Ended  September 30, 2013
	(In Thousands)
Net regulatory assets/(liabilities), December 31, 2012	$	176,605
Unrealized (gains) and losses, net		(28,850	)
Net regulatory assets/(liabilities), September 30, 2013	$	147,755