REGULATORY PROCEEDINGS	9 Months Ended
Sep. 30, 2014
REGULATORY PROCEEDINGS [Abstract]
REGULATORY PROCEEDINGS	(C) REGULATORY PROCEEDINGS Electric Distribution and Transmission Rates On February 15, 2013, UI filed an application to amend its existing distribution rate schedules for two rate years. On August 14, 2013, PURA issued a decision (the August Decision) which became effective on that date and which, among other things, increased the UI distribution and CTA allowed return on equity (ROE) from 8.75% to 9.15%, continued UI’s existing earnings sharing mechanism by which UI and customers share on a 50/50 basis all distribution earnings above the allowed ROE in a calendar year, continued the existing decoupling mechanism, and approved the establishment of the requested storm reserve. Additionally, the August Decision disallowed approximately $22 million related to deferred storm costs and capital costs related to UI’s recently constructed administrative and operations buildings. As a result of these disallowances and other adjustments related to the rate proceeding, we recorded a one-time pre-tax write off of $17.5 million related to UI in the third quarter of 2013. On December 16, 2013, PURA issued a final decision on UI’s Petition for Reconsideration of the August Decision. The final decision on the reconsideration restored approximately $6.8 million of deferred storm costs and approximately $2.7 million of capital costs related to UI’s recently constructed administrative and operations buildings which had been disallowed in the August Decision. As a result, we recorded a one-time pre-tax adjustment of approximately $9.2 million in the fourth quarter of 2013 to reverse such amounts written off in the third quarter of 2013 as a result of the August Decision. The resulting storm regulatory asset allowed for recovery totaled approximately $45 million. As a result of PURA’s final decision in UI’s final CTA reconciliation proceeding, the remaining storm regulatory asset was offset against the remaining CTA and Connecticut Yankee DOE litigation regulatory liabilities. See Note “–Electric Distribution and Transmission – Other Proceedings” for additional information. Power Supply Arrangements UI has wholesale power supply agreements in place for its entire standard service load for all of 2014, for 70% of its standard service load for the first half of 2015 and 30% for the second half of 2015. UI determined that its contracts for standard service and supplier of last resort service are derivatives under ASC 815 “Derivatives and Hedging” and elected the “normal purchase, normal sale” exception under ASC 815 “Derivatives and Hedging.” 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 were to fall below investment grade. If UI’s credit rating were to decline one rating at Standard & Poor’s or two ratings at Moody’s 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 at Standard & Poor’s and three ratings at Moody’s to fall below investment grade. 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 an event had occurred as of September 30, 2014 UI would have had to post an aggregate of approximately $9.7 million in collateral. New Renewable Source Generation Under Connecticut Public Act No. 11-80, “An Act Concerning the Establishment of the Department of Energy and Environmental Protection and Planning for Connecticut's Energy Future” (PA 11-80), Connecticut electric utilities are required to enter into long-term contracts to purchase Renewable Energy Credits (RECs) from renewable generators located on customer premises. Under this program, UI is 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 per year after all selected projects are online. Upon purchase, UI accounts for the RECs as inventory. UI expects to partially mitigate the cost of these contracts through the resale of the RECs. PA 11-80 provides that the remaining costs (and any benefits) of these contracts, including any gain or loss resulting from the resale of the RECs, are fully recoverable from (or credited to) customers through electric rates. On October 23, 2013, PURA approved UI’s renewable connections program filed in accordance with PA 11-80, through which UI would develop up to 10 MW of renewable generation. UI’s proposed budget of $35.0 million to develop the initial 7.8 MW has been approved by PURA. The costs for this program would be recovered on a cost of service basis. In its approval, PURA established a base ROE to be calculated as the greater of: (A) the current UI authorized distribution ROE plus 25 basis points and (B) the current authorized distribution ROE for CL&P, less target equivalent market revenues (reflected as 25 basis points). In addition, UI will retain a percentage of the market revenues from the project, which percentage is expected to equate to approximately 25 basis points on a levelized basis over the life of the project. Section 6 of Connecticut Public Act 13-303, “An Act Concerning Connecticut’s Clean Energy Goals,” (PA 13-303), authorized DEEP to direct Connecticut’s electric distribution companies, including UI, to enter into contracts for energy and/or RECs from Class I renewable resources in a quantity of up to 4% of the electric distribution companies’ distribution load. On July 8, 2013, DEEP issued a request for proposals (RFP), and directed UI and CL&P to enter into power purchase agreements with the winning bidders. On September 19, 2013, UI entered into contracts with two of the winning bidders, totaling approximately 3.5% of UI’s distribution load, which were subsequently approved by PURA. Costs of each of these agreements will be fully recoverable through electric rates. On December 18, 2013, Allco Finance Limited, an unsuccessful bidder in the RFP, filed a complaint against DEEP in the United States District Court in Connecticut alleging that DEEP’s direction to UI and CL&P to enter into the contracts violated the Supremacy Clause of the U.S. Constitution and the Federal Power Act by setting wholesale electricity rates. UI is not a party to the litigation. Section 8 of PA 13-303 authorized DEEP to direct Connecticut’s electric distribution companies, including UI, to enter into contracts for energy and/or RECs from biomass, landfill gas and small hydro projects that qualify as Connecticut Class I renewable resources in a quantity up to 4% of the electric distribution companies’ distribution load. At the direction of DEEP, in January 2014, UI entered into three contracts for the purchase of RECs associated with an aggregate of 5.7 MW of energy production from biomass plants in New England, which were subsequently approved by PURA. PA 13‑303 provides that costs of any such agreements will be fully recoverable through electric rates. Transmission 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 2014, UI is estimating an overall allowed weighted-average ROE for its transmission business in the range of 12.0% to 12.2%. This range includes the impact of the FERC order issued on October 16, 2014 and excludes any impacts of the reserve adjustment, both of which are discussed below. In September 2011, several New England governmental entities, including PURA, the Connecticut Attorney General and the Connecticut Office of Consumer Counsel, filed a joint complaint (Initial Complaint) with the FERC against ISO-NE and several New England transmission owners, including UI, claiming that the current approved base ROE used in calculating formula rates for transmission service under the ISO-NE Open Access Transmission Tariff by the New England transmission owners of 11.14% is not just and reasonable and seeking a proposed reduction of the base ROE to 9.20% to be effective October 1, 2011. A refund period of October 1, 2011 through December 31, 2012 (refund period) was established. On August 6, 2013, the presiding Administrative Law Judge issued an initial decision finding that the existing base ROE was unjust and unreasonable, and that the just and reasonable base ROE is 10.6% for the refund period and 9.7% for the period after a final opinion is issued by the FERC, prior to any adjustments that may be applied by the FERC in a final order based on the change in 10-year U.S. Treasury Bond rates from the date hearings closed to the date of the FERC’s order. We recorded a reserve for the refund period related to the Initial Complaint of $2.6 million pre-tax during the third quarter of 2013 based upon our assessment of the ultimate outcome of the proceeding. In December 2012, various additional parties filed a complaint with the FERC against several New England transmission owners, including UI, seeking a proposed reduction of the base ROE to 8.70%, effective December 27, 2012 (Second Complaint). On June 19, 2014, FERC issued an order (June Order) in the Initial Complaint, tentatively finding that the just and reasonable base ROE for the New England transmission owners’ tariff is 10.57%. In the June Order, FERC adopted a new method for determining cost of equity, changing from a one-step discounted cash flow (DCF) methodology to a two-step DCF, which includes a long-term growth component. FERC also discontinued its past practice of adjusting the ROE to reflect changes in U.S. Treasury bond yields from the date of closing of the evidentiary record to the date of FERC decision. In addition, FERC determined that it was inappropriate for the Administrative Law Judge to establish two separate ROEs, ordering that the final ROE, once determined, would apply to the refund period and prospectively. The June Order applied the two-step DCF methodology, using an assumed long-term growth rate based on the Gross Domestic Product, to tentatively find that the zone of reasonableness for the New England transmission owners is 7.03% to 11.74%. Within that tentative zone of reasonableness, FERC found that, taking into account the unusual capital market conditions, the just and reasonable base ROE for the New England transmission owners’ tariff should be set halfway between the midpoint of the zone of reasonableness and the top of the zone of reasonableness, which, based on the record thus far in the proceeding, is 10.57%. In connection with the application of the two-step DCF method, FERC established a paper hearing process following which FERC confirmed in its order on October 16, 2014 (October Order) that the Gross Domestic Product was the appropriate long-term growth rate to be used when calculating the base ROE. Also in the October Order, the FERC set the New England transmission owners base ROE at 10.57% with a total or maximum ROE including incentives not to exceed 11.74%, for both the refund period and going forward effective on October 16, 2014. Also on June 19, 2014, FERC announced it would institute hearing and settlement judge procedures in the Second Complaint. FERC determined there would be a 15-month refund period beginning December 27, 2012. If settlement procedures are unsuccessful and this complaint is litigated, a final FERC order would likely be issued in 2016. On October 21, 2014, the Settlement Judge recommended termination of settlement proceedings as the parties had indicated that they are at an impasse. On July 21, 2014, the New England transmission owners filed a request for clarification or rehearing, and the state complainants and others filed a request for rehearing, of various issues in the FERC order on the Initial Complaint, and the New England transmission owners filed a request for clarification or rehearing of the order on the Second Complaint. On July 31, 2014, complainants in the Initial Complaint and the Second Complaint filed an additional complaint (Third Complaint) with the FERC against the New England transmission owners, alleging that the current base ROE of 11.14% is not just and reasonable, and that under the new FERC two-step DCF methodology, the base ROE should be set at 8.84% or no more than 9.44%, the midpoint of the zone of reasonableness calculated by their consultant. The Third Complaint argues that the FERC should not follow its June 19, 2014 Order setting the ROE at halfway between the midpoint and the top of the zone of reasonableness because financial market conditions are not anomalous. The complainants have requested a 15-month refund period beginning July 31, 2014, and also ask for a determination that the top of the zone of reasonableness caps the ROE for each individual project. During the third quarter, we updated our assessment based upon the most recent information available. Although we cannot predict the outcome of the proceedings involving the Second and Third Complaints, we have recorded reserves relating to potential refunds to customers, recording an additional pre-tax reserve of $5.3 million during the third quarter of 2014. 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 (GSRP), which was fully energized in November 2013, (2) the Interstate Reliability Project (IRP), which is expected to be placed in service in late 2015 and (3) the Central Connecticut Reliability Project (CCRP), which is being reassessed as part of the Greater Hartford Central Connecticut Study (GHCC). As CL&P places assets in service, it will transfer title to certain NEEWS transmission assets to UI in proportion to UI’s investments, but CL&P will continue to maintain these portions of the transmission system pursuant to an operating and maintenance agreement (O&M Agreement) with UI. Any termination of the Agreement pursuant to its terms would have no effect on the assets previously transferred to UI. Under the terms of the Agreement, UI has the option to make quarterly deposits to CL&P in exchange for ownership of specific NEEWS 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 originally proposed Connecticut portions of the NEEWS projects. Based upon the current projected costs, UI’s investment rights in GSRP and IRP would be approximately $45 million. In July 2014, ISO-NE presented the preferred GHCC transmission solutions to its Planning Advisory Committee. UI is awaiting the final ISO-NE GHCC transmission solution report, expected in the fourth quarter of 2014, to determine the impact on UI’s aggregate investment in NEEWS. Deposits associated with NEEWS are recorded as assets at the time the deposit is made and they are reported in the ‘Other’ line item within the Deferred Charges and Other Assets section of the consolidated balance sheet. When title to the assets is transferred to UI, the amount of the corresponding deposit is reclassified from other assets to plant-in-service on the balance sheet and shown as a non-cash investing activity in the consolidated statement of cash flows. As of September 30, 2014, UI had made aggregate deposits of $40.2 million under the Agreement since its inception, with assets valued at approximately $24.6 million having been transferred to UI, as follows: In September 2012, CL&P transferred approximately $6.2 million of transmission assets associated with the GSRP, and in February 2013, CL&P transferred approximately $18.4 million of transmission assets, representing the remaining portion of the GSRP. UI earned pre-tax income on deposits, net of transferred assets, of approximately $0.5 million and $0.3 million in the three-month periods ended September 30, 2014 and 2013, respectively. UI earned pre-tax income on deposits, net of transferred assets, of approximately $1.2 million in each of the nine-month periods ended September 30, 2014 and 2013. Equity Investment in Peaking Generation UI is party to a 50-50 joint venture with NRG affiliates in GenConn, which operates two peaking generation plants in Connecticut. The two peaking generation plants, GenConn Devon and GenConn Middletown, are both participating in the ISO-New England markets. PURA has approved revenue requirements for the period from January 1, 2014 through December 31, 2014 of $30.8 million and $37.5 million for GenConn Devon and GenConn Middletown, respectively. In addition, PURA has ruled that GenConn project costs incurred that were in excess of the proposed costs originally submitted in 2008 were prudently incurred and are recoverable. Such costs are included in the determination of the 2014 approved revenue requirements. GenConn filed a revenue requirements request with PURA on June 25, 2014, seeking approval of its 2015 revenue requirements for the period commencing January 1, 2015 for both the GenConn Devon and GenConn Middletown facilities. A final decision on this request is expected by the end of 2014. Other Proceedings On October 2, 2014, PURA issued a draft decision in a docket addressing UI’s semi-annual Generation Service Charge (GSC), bypassable federally mandated congestion charge and the nonbypassable federally mandated congestion charge reconciliations. PURA’s draft decision, for which UI has filed written exceptions and will present oral arguments, if adopted without change as the final decision, would allow for recovery of $8.3 million of the $11.3 million request included in UI’s filing for the reconciliation of certain revenues and expenses relating to the period from 2004 through 2013 and result in UI recording a pre-tax write-off of approximately $3.1 million during the fourth quarter of 2014. On October 20, 2014, PURA issued a draft decision in UI’s final CTA reconciliation proceeding. Based upon our assessment, we believe that it is probable that the final decision will result in the extinguishment of all remaining CTA balances and, as such, we have eliminated the CTA balances as of September 30, 2014. In addition, the draft decision allowed for the application of an approximate $8.2 million remaining CTA regulatory liability as well as an approximate $12.0 million regulatory liability related to the Connecticut Yankee DOE litigation against the storm regulatory asset balance. The remaining regulatory liability balance was applied to the GSC “working capital allowance” and will be returned to customers through the nonbypassable federally mandated congestion charge. Gas Distribution Rates The allowed returns on equity established by PURA are 9.18% 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 and included an approved ROE of 10.5%, expired on January 31, 2012. Berkshire continues to charge the rates that were in effect at the end of the rate plan. In response to a letter from the DPU requesting that Berkshire notify the DPU when Berkshire expected to file its next base distribution rate case and the test year for the filing, Berkshire responded that calendar year 2014 would be the earliest test year for a base rate case, and with such a test year a case would be filed by approximately May 15, 2015 with rates to be effective April 1, 2016. On July 8, 2013, CNG filed an application to amend its existing base delivery rate. On January 22, 2014, PURA issued a final decision, with an effective date of January 10, 2014, which, among other things, approved an allowed ROE of 9.18%, a decoupling mechanism, and two separate ratemaking mechanisms that reconcile actual revenue requirements related to CNG’s cast iron and bare steel replacement program and system expansion. Additionally, the final decision requires the establishment of an earnings sharing mechanism by which CNG and customers share on a 50/50 basis all earnings above the allowed ROE in a calendar year. The decision also allows CNG, on a provisional basis, to reflect the increased rate base resulting from the accumulated deferred income tax (ADIT) impacts of the election of Section 338(h)(10) of the Internal Revenue Code upon its acquisition by UIL Holdings. The decision requires CNG to seek a private letter ruling from the Internal Revenue Service with regard to the specific question of whether, after extinguishment of an ADIT balance, a directive by a public utility commission to institute a ratemaking mechanism to reflect a credit to ratepayers of ADIT benefits lost through a Section 338(h)(10) election would result in a normalization violation. The decision states that in the event of a ruling from the Internal Revenue Service stating that imposing such a ratemaking mechanism would not create a normalization violation, PURA would adjust rates to offset the ratemaking impacts of the 338(h)(10) election on rate base. We estimate the impact to be an approximate $2.5 to $3.5 million decrease in annual revenue requirements. In March 2014, CNG filed a draft of its private letter ruling request with PURA for approval. During the first quarter of 2014, the Office of Consumer Counsel (OCC) appealed the decision to the Connecticut Superior Court with regard to the establishment of an adjustment mechanism for incremental cast iron and bare steel replacement as well as PURA’s directive to seek a private letter ruling with respect to the extinguishment of ADITs rather than ordering a rate credit to hold customers harmless from the ratemaking effect of extinguishing the ADITs. At the request of PURA, the OCC and CNG have entered into settlement discussions regarding the appeal and CNG requested from PURA, and was granted, an extension of time for submitting the private letter ruling request to the Internal Revenue Service.

Electric Distribution and Transmission

Rates

On February 15, 2013, UI filed an application to amend its existing distribution rate schedules for two rate years. On August 14, 2013, PURA issued a decision (the August Decision) which became effective on that date and which, among other things, increased the UI distribution and CTA allowed return on equity (ROE) from 8.75% to 9.15%, continued UI’s existing earnings sharing mechanism by which UI and customers share on a 50/50 basis all distribution earnings above the allowed ROE in a calendar year, continued the existing decoupling mechanism, and approved the establishment of the requested storm reserve. Additionally, the August Decision disallowed approximately $22 million related to deferred storm costs and capital costs related to UI’s recently constructed administrative and operations buildings. As a result of these disallowances and other adjustments related to the rate proceeding, we recorded a one-time pre-tax write off of $17.5 million related to UI in the third quarter of 2013.

On December 16, 2013, PURA issued a final decision on UI’s Petition for Reconsideration of the August Decision. The final decision on the reconsideration restored approximately $6.8 million of deferred storm costs and approximately $2.7 million of capital costs related to UI’s recently constructed administrative and operations buildings which had been disallowed in the August Decision. As a result, we recorded a one-time pre-tax adjustment of approximately $9.2 million in the fourth quarter of 2013 to reverse such amounts written off in the third quarter of 2013 as a result of the August Decision. The resulting storm regulatory asset allowed for recovery totaled approximately $45 million. As a result of PURA’s final decision in UI’s final CTA reconciliation proceeding, the remaining storm regulatory asset was offset against the remaining CTA and Connecticut Yankee DOE litigation regulatory liabilities. See Note “–Electric Distribution and Transmission – Other Proceedings” for additional information.

Power Supply Arrangements

UI has wholesale power supply agreements in place for its entire standard service load for all of 2014, for 70% of its standard service load for the first half of 2015 and 30% for the second half of 2015. UI determined that its contracts for standard service and supplier of last resort service are derivatives under ASC 815 “Derivatives and Hedging” and elected the “normal purchase, normal sale” exception under ASC 815 “Derivatives and Hedging.” 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 were to fall below investment grade. If UI’s credit rating were to decline one rating at Standard & Poor’s or two ratings at Moody’s 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 at Standard & Poor’s and three ratings at Moody’s to fall below investment grade. 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 an event had occurred as of September 30, 2014 UI would have had to post an aggregate of approximately $9.7 million in collateral.

New Renewable Source Generation

Under Connecticut Public Act No. 11-80, “An Act Concerning the Establishment of the Department of Energy and Environmental Protection and Planning for Connecticut's Energy Future” (PA 11-80), Connecticut electric utilities are required to enter into long-term contracts to purchase Renewable Energy Credits (RECs) from renewable generators located on customer premises. Under this program, UI is 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 per year after all selected projects are online. Upon purchase, UI accounts for the RECs as inventory. UI expects to partially mitigate the cost of these contracts through the resale of the RECs. PA 11-80 provides that the remaining costs (and any benefits) of these contracts, including any gain or loss resulting from the resale of the RECs, are fully recoverable from (or credited to) customers through electric rates.

On October 23, 2013, PURA approved UI’s renewable connections program filed in accordance with PA 11-80, through which UI would develop up to 10 MW of renewable generation. UI’s proposed budget of $35.0 million to develop the initial 7.8 MW has been approved by PURA. The costs for this program would be recovered on a cost of service basis. In its approval, PURA established a base ROE to be calculated as the greater of: (A) the current UI authorized distribution ROE plus 25 basis points and (B) the current authorized distribution ROE for CL&P, less target equivalent market revenues (reflected as 25 basis points). In addition, UI will retain a percentage of the market revenues from the project, which percentage is expected to equate to approximately 25 basis points on a levelized basis over the life of the project.

Section 6 of Connecticut Public Act 13-303, “An Act Concerning Connecticut’s Clean Energy Goals,” (PA 13-303), authorized DEEP to direct Connecticut’s electric distribution companies, including UI, to enter into contracts for energy and/or RECs from Class I renewable resources in a quantity of up to 4% of the electric distribution companies’ distribution load. On July 8, 2013, DEEP issued a request for proposals (RFP), and directed UI and CL&P to enter into power purchase agreements with the winning bidders. On September 19, 2013, UI entered into contracts with two of the winning bidders, totaling approximately 3.5% of UI’s distribution load, which were subsequently approved by PURA. Costs of each of these agreements will be fully recoverable through electric rates. On December 18, 2013, Allco Finance Limited, an unsuccessful bidder in the RFP, filed a complaint against DEEP in the United States District Court in Connecticut alleging that DEEP’s direction to UI and CL&P to enter into the contracts violated the Supremacy Clause of the U.S. Constitution and the Federal Power Act by setting wholesale electricity rates. UI is not a party to the litigation.

Section 8 of PA 13-303 authorized DEEP to direct Connecticut’s electric distribution companies, including UI, to enter into contracts for energy and/or RECs from biomass, landfill gas and small hydro projects that qualify as Connecticut Class I renewable resources in a quantity up to 4% of the electric distribution companies’ distribution load. At the direction of DEEP, in January 2014, UI entered into three contracts for the purchase of RECs associated with an aggregate of 5.7 MW of energy production from biomass plants in New England, which were subsequently approved by PURA. PA 13‑303 provides that costs of any such agreements will be fully recoverable through electric rates.

Transmission

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 2014, UI is estimating an overall allowed weighted-average ROE for its transmission business in the range of 12.0% to 12.2%. This range includes the impact of the FERC order issued on October 16, 2014 and excludes any impacts of the reserve adjustment, both of which are discussed below.

In September 2011, several New England governmental entities, including PURA, the Connecticut Attorney General and the Connecticut Office of Consumer Counsel, filed a joint complaint (Initial Complaint) with the FERC against ISO-NE and several New England transmission owners, including UI, claiming that the current approved base ROE used in calculating formula rates for transmission service under the ISO-NE Open Access Transmission Tariff by the New England transmission owners of 11.14% is not just and reasonable and seeking a proposed reduction of the base ROE to 9.20% to be effective October 1, 2011. A refund period of October 1, 2011 through December 31, 2012 (refund period) was established.

On August 6, 2013, the presiding Administrative Law Judge issued an initial decision finding that the existing base ROE was unjust and unreasonable, and that the just and reasonable base ROE is 10.6% for the refund period and 9.7% for the period after a final opinion is issued by the FERC, prior to any adjustments that may be applied by the FERC in a final order based on the change in 10-year U.S. Treasury Bond rates from the date hearings closed to the date of the FERC’s order. We recorded a reserve for the refund period related to the Initial Complaint of $2.6 million pre-tax during the third quarter of 2013 based upon our assessment of the ultimate outcome of the proceeding.

In December 2012, various additional parties filed a complaint with the FERC against several New England transmission owners, including UI, seeking a proposed reduction of the base ROE to 8.70%, effective December 27, 2012 (Second Complaint).

On June 19, 2014, FERC issued an order (June Order) in the Initial Complaint, tentatively finding that the just and reasonable base ROE for the New England transmission owners’ tariff is 10.57%. In the June Order, FERC adopted a new method for determining cost of equity, changing from a one-step discounted cash flow (DCF) methodology to a two-step DCF, which includes a long-term growth component. FERC also discontinued its past practice of adjusting the ROE to reflect changes in U.S. Treasury bond yields from the date of closing of the evidentiary record to the date of FERC decision. In addition, FERC determined that it was inappropriate for the Administrative Law Judge to establish two separate ROEs, ordering that the final ROE, once determined, would apply to the refund period and prospectively.

The June Order applied the two-step DCF methodology, using an assumed long-term growth rate based on the Gross Domestic Product, to tentatively find that the zone of reasonableness for the New England transmission owners is 7.03% to 11.74%. Within that tentative zone of reasonableness, FERC found that, taking into account the unusual capital market conditions, the just and reasonable base ROE for the New England transmission owners’ tariff should be set halfway between the midpoint of the zone of reasonableness and the top of the zone of reasonableness, which, based on the record thus far in the proceeding, is 10.57%. In connection with the application of the two-step DCF method, FERC established a paper hearing process following which FERC confirmed in its order on October 16, 2014 (October Order) that the Gross Domestic Product was the appropriate long-term growth rate to be used when calculating the base ROE. Also in the October Order, the FERC set the New England transmission owners base ROE at 10.57% with a total or maximum ROE including incentives not to exceed 11.74%, for both the refund period and going forward effective on October 16, 2014.

Also on June 19, 2014, FERC announced it would institute hearing and settlement judge procedures in the Second Complaint. FERC determined there would be a 15-month refund period beginning December 27, 2012. If settlement procedures are unsuccessful and this complaint is litigated, a final FERC order would likely be issued in 2016. On October 21, 2014, the Settlement Judge recommended termination of settlement proceedings as the parties had indicated that they are at an impasse.

On July 21, 2014, the New England transmission owners filed a request for clarification or rehearing, and the state complainants and others filed a request for rehearing, of various issues in the FERC order on the Initial Complaint, and the New England transmission owners filed a request for clarification or rehearing of the order on the Second Complaint.

On July 31, 2014, complainants in the Initial Complaint and the Second Complaint filed an additional complaint (Third Complaint) with the FERC against the New England transmission owners, alleging that the current base ROE of 11.14% is not just and reasonable, and that under the new FERC two-step DCF methodology, the base ROE should be set at 8.84% or no more than 9.44%, the midpoint of the zone of reasonableness calculated by their consultant. The Third Complaint argues that the FERC should not follow its June 19, 2014 Order setting the ROE at halfway between the midpoint and the top of the zone of reasonableness because financial market conditions are not anomalous. The complainants have requested a 15-month refund period beginning July 31, 2014, and also ask for a determination that the top of the zone of reasonableness caps the ROE for each individual project.

During the third quarter, we updated our assessment based upon the most recent information available. Although we cannot predict the outcome of the proceedings involving the Second and Third Complaints, we have recorded reserves relating to potential refunds to customers, recording an additional pre-tax reserve of $5.3 million during the third quarter of 2014.

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 (GSRP), which was fully energized in November 2013, (2) the Interstate Reliability Project (IRP), which is expected to be placed in service in late 2015 and (3) the Central Connecticut Reliability Project (CCRP), which is being reassessed as part of the Greater Hartford Central Connecticut Study (GHCC). As CL&P places assets in service, it will transfer title to certain NEEWS transmission assets to UI in proportion to UI’s investments, but CL&P will continue to maintain these portions of the transmission system pursuant to an operating and maintenance agreement (O&M Agreement) with UI. Any termination of the Agreement pursuant to its terms would have no effect on the assets previously transferred to UI.

Under the terms of the Agreement, UI has the option to make quarterly deposits to CL&P in exchange for ownership of specific NEEWS 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 originally proposed Connecticut portions of the NEEWS projects. Based upon the current projected costs, UI’s investment rights in GSRP and IRP would be approximately $45 million. In July 2014, ISO-NE presented the preferred GHCC transmission solutions to its Planning Advisory Committee. UI is awaiting the final ISO-NE GHCC transmission solution report, expected in the fourth quarter of 2014, to determine the impact on UI’s aggregate investment in NEEWS.

Deposits associated with NEEWS are recorded as assets at the time the deposit is made and they are reported in the ‘Other’ line item within the Deferred Charges and Other Assets section of the consolidated balance sheet. When title to the assets is transferred to UI, the amount of the corresponding deposit is reclassified from other assets to plant-in-service on the balance sheet and shown as a non-cash investing activity in the consolidated statement of cash flows.

As of September 30, 2014, UI had made aggregate deposits of $40.2 million under the Agreement since its inception, with assets valued at approximately $24.6 million having been transferred to UI, as follows: In September 2012, CL&P transferred approximately $6.2 million of transmission assets associated with the GSRP, and in February 2013, CL&P transferred approximately $18.4 million of transmission assets, representing the remaining portion of the GSRP. UI earned pre-tax income on deposits, net of transferred assets, of approximately $0.5 million and $0.3 million in the three-month periods ended September 30, 2014 and 2013, respectively. UI earned pre-tax income on deposits, net of transferred assets, of approximately $1.2 million in each of the nine-month periods ended September 30, 2014 and 2013.

Equity Investment in Peaking Generation

UI is party to a 50-50 joint venture with NRG affiliates in GenConn, which operates two peaking generation plants in Connecticut. The two peaking generation plants, GenConn Devon and GenConn Middletown, are both participating in the ISO-New England markets. PURA has approved revenue requirements for the period from January 1, 2014 through December 31, 2014 of $30.8 million and $37.5 million for GenConn Devon and GenConn Middletown, respectively. In addition, PURA has ruled that GenConn project costs incurred that were in excess of the proposed costs originally submitted in 2008 were prudently incurred and are recoverable. Such costs are included in the determination of the 2014 approved revenue requirements.

GenConn filed a revenue requirements request with PURA on June 25, 2014, seeking approval of its 2015 revenue requirements for the period commencing January 1, 2015 for both the GenConn Devon and GenConn Middletown facilities. A final decision on this request is expected by the end of 2014.

Other Proceedings

On October 2, 2014, PURA issued a draft decision in a docket addressing UI’s semi-annual Generation Service Charge (GSC), bypassable federally mandated congestion charge and the nonbypassable federally mandated congestion charge reconciliations. PURA’s draft decision, for which UI has filed written exceptions and will present oral arguments, if adopted without change as the final decision, would allow for recovery of $8.3 million of the $11.3 million request included in UI’s filing for the reconciliation of certain revenues and expenses relating to the period from 2004 through 2013 and result in UI recording a pre-tax write-off of approximately $3.1 million during the fourth quarter of 2014.

On October 20, 2014, PURA issued a draft decision in UI’s final CTA reconciliation proceeding. Based upon our assessment, we believe that it is probable that the final decision will result in the extinguishment of all remaining CTA balances and, as such, we have eliminated the CTA balances as of September 30, 2014. In addition, the draft decision allowed for the application of an approximate $8.2 million remaining CTA regulatory liability as well as an approximate $12.0 million regulatory liability related to the Connecticut Yankee DOE litigation against the storm regulatory asset balance. The remaining regulatory liability balance was applied to the GSC “working capital allowance” and will be returned to customers through the nonbypassable federally mandated congestion charge.

Gas Distribution

Rates

The allowed returns on equity established by PURA are 9.18% 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 and included an approved ROE of 10.5%, expired on January 31, 2012. Berkshire continues to charge the rates that were in effect at the end of the rate plan. In response to a letter from the DPU requesting that Berkshire notify the DPU when Berkshire expected to file its next base distribution rate case and the test year for the filing, Berkshire responded that calendar year 2014 would be the earliest test year for a base rate case, and with such a test year a case would be filed by approximately May 15, 2015 with rates to be effective April 1, 2016.

On July 8, 2013, CNG filed an application to amend its existing base delivery rate. On January 22, 2014, PURA issued a final decision, with an effective date of January 10, 2014, which, among other things, approved an allowed ROE of 9.18%, a decoupling mechanism, and two separate ratemaking mechanisms that reconcile actual revenue requirements related to CNG’s cast iron and bare steel replacement program and system expansion. Additionally, the final decision requires the establishment of an earnings sharing mechanism by which CNG and customers share on a 50/50 basis all earnings above the allowed ROE in a calendar year. The decision also allows CNG, on a provisional basis, to reflect the increased rate base resulting from the accumulated deferred income tax (ADIT) impacts of the election of Section 338(h)(10) of the Internal Revenue Code upon its acquisition by UIL Holdings. The decision requires CNG to seek a private letter ruling from the Internal Revenue Service with regard to the specific question of whether, after extinguishment of an ADIT balance, a directive by a public utility commission to institute a ratemaking mechanism to reflect a credit to ratepayers of ADIT benefits lost through a Section 338(h)(10) election would result in a normalization violation. The decision states that in the event of a ruling from the Internal Revenue Service stating that imposing such a ratemaking mechanism would not create a normalization violation, PURA would adjust rates to offset the ratemaking impacts of the 338(h)(10) election on rate base. We estimate the impact to be an approximate $2.5 to $3.5 million decrease in annual revenue requirements. In March 2014, CNG filed a draft of its private letter ruling request with PURA for approval. During the first quarter of 2014, the Office of Consumer Counsel (OCC) appealed the decision to the Connecticut Superior Court with regard to the establishment of an adjustment mechanism for incremental cast iron and bare steel replacement as well as PURA’s directive to seek a private letter ruling with respect to the extinguishment of ADITs rather than ordering a rate credit to hold customers harmless from the ratemaking effect of extinguishing the ADITs. At the request of PURA, the OCC and CNG have entered into settlement discussions regarding the appeal and CNG requested from PURA, and was granted, an extension of time for submitting the private letter ruling request to the Internal Revenue Service.