(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. Our 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 the fair value of our financial assets and liabilities, other than pension benefits and other postretirement benefits, as of September 30, 2014 and December 31, 2013.

	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, 2014	(In Thousands)
Assets:
Derivative assets	$	-	$	-		$	28,806		$	28,806
Noncurrent investments		11,249		-			-			11,249
Deferred Compensation Plan		3,502		-			-			3,502
Supplemental retirement benefit trust life insurance policies		-		8,259			-			8,259
	$	14,751	$	8,259		$	28,806		$	51,816

Liabilities:
Derivative liabilities	$	-	$	-		$	83,352		$	83,352
Long-term debt		-		1,915,475			-			1,915,475
	$	-	$	1,915,475		$	83,352		$	1,998,827

Net fair value assets/(liabilities), September 30, 2014	$	14,751	$	(1,907,216	)	$	(54,546	)	$	(1,947,011	)

December 31, 2013
Assets:
Derivative assets	$	-	$	-		$	53,447		$	53,447
Noncurrent investments		11,148		-			-			11,148
Deferred Compensation Plan		3,775		-			-			3,775
Supplemental retirement benefit trust life insurance policies		-		7,898			-			7,898
	$	14,923	$	7,898		$	53,447		$	76,268

Liabilities:
Derivative liabilities	$	-	$	-		$	196,233		$	196,233
Long-term debt		-		1,846,867			-			1,846,867
	$	-	$	1,846,867		$	196,233		$	2,043,100

Net fair value assets/(liabilities), December 31, 2013	$	14,923	$	(1,838,969	)	$	(142,786	)	$	(1,966,832	)

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 consist primarily of CfDs. 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, 2014 or December 31, 2013 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. We believe this methodology provides the most reasonable estimates of the amount of future discounted cash flows associated with the CfDs. Additionally, on a quarterly basis, we perform analytics to ensure that the fair value of the derivatives is consistent with changes, if any, in the various fair value model inputs. Additional quantitative information about Level 3 fair value measurements is as follows:

		Range at	Range at
	Unobservable Input	September 30, 2014	December 31, 2013

Contracts for differences	Risk of non-performance	0.00% - 0.64%	0.00% - 0.62%
	Discount rate	1.78% - 2.64%	1.75% - 3.21%
	Forward pricing ($ per MW)	$3.15 - $14.59	$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.

The fair value of the noncurrent investments is determined using quoted market prices in active markets for identical assets. The investments primarily consist of money market funds.

Under the UIL Deferred Compensation Plan (DCP), directors, named executive officers and certain other executives may elect to defer certain elements of compensation. Participants in the DCP are permitted to direct investments of their elective deferral accounts into “deemed” investments consisting of mutual funds and UIL Holdings common stock equivalents. These investments, which are actively traded in sufficient frequency and volume to provide pricing information on an ongoing basis, are marked-to-market based upon such pricing information.

The determination of the fair value of the supplemental retirement benefit trust life insurance policies was based on quoted prices as of September 30, 2014 and December 31, 2013 in the active markets for the various funds within which the assets are held.

Long-term debt is carried at cost on the consolidated balance sheet. The fair value of long-term debt as displayed in the table above 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 nine-month period ended September 30, 2014.

	Nine Months Ended September 30, 2014
	(In Thousands)

Net derivative assets/(liabilities), December 31, 2013	$	(142,786	)
Unrealized gains and (losses), net		88,240
Net derivative assets/(liabilities), September 30, 2014	$	(54,546	)

Change in unrealized gains (losses), net relating to net derivative assets/(liabilities), still held as of September 30, 2014	$	88,240

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, 2014. The amounts offset the net CfDs liabilities included in the derivative liabilities detailed above.

	Nine Months Ended September 30, 2014
	(In Thousands)

Net regulatory assets/(liabilities), December 31, 2013	$	142,786
Unrealized (gains) and losses, net		(88,240	)
Net regulatory assets/(liabilities), September 30, 2014	$	54,546