-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 QLRaRugw9yNEdvUC2KSn9PgBedMMBiXeBsCxkXLGyYtguLKKc+bbZcWoR3sW9p5q
 F1wgCPpAP/jWHJFCQjRPLw==

<SEC-DOCUMENT>0000072741-01-500169.txt : 20020413
<SEC-HEADER>0000072741-01-500169.hdr.sgml : 20020413
ACCESSION NUMBER:		0000072741-01-500169
CONFORMED SUBMISSION TYPE:	U-1/A
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20011221

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NORTHEAST UTILITIES SYSTEM
		CENTRAL INDEX KEY:			0000072741
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRIC SERVICES [4911]
		IRS NUMBER:				042147929
		STATE OF INCORPORATION:			MA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		U-1/A
		SEC ACT:		1935 Act
		SEC FILE NUMBER:	070-09839
		FILM NUMBER:		1820805

	BUSINESS ADDRESS:	
		STREET 1:		174 BRUSH HILL AVE
		CITY:			WEST SPRINGFIELD
		STATE:			MA
		ZIP:			01090-0010
		BUSINESS PHONE:		4137855871

	MAIL ADDRESS:	
		STREET 1:		107 SELDON ST
		CITY:			BERLIN
		STATE:			CT
		ZIP:			06037-1616
</SEC-HEADER>
<DOCUMENT>
<TYPE>U-1/A
<SEQUENCE>1
<FILENAME>clp122101useofprocu1a.txt
<DESCRIPTION>CL&P DPUC CAPITAL STRUCTURE
<TEXT>

                                                 NO. 70-9839

               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D. C. 20549

                         AMENDMENT NO. 6
                               TO
                     APPLICATION/DECLARATION
                               ON
                            FORM U-1
                            UNDER THE
           PUBLIC UTILITY HOLDING COMPANY ACT OF 1935


                      Northeast Utilities
              Western Massachusetts Electric Company
                      174 Brush Hill Road
                   West Springfield, MA 01089

              The Connecticut Light and Power Company
                      107 Selden Street
                      Berlin, CT 06037


 (Names of companies filing this statement and addresses of principal
                       executive offices)

                       NORTHEAST UTILITIES
            (Name of top registered holding company)

                        Gregory B. Butler
          Vice President, Secretary and General Counsel
               Northeast Utilities Service Company
                        107 Selden Street
                        Berlin, CT 06037
             (Name and address of agent for service)

   The Commission is requested to mail signed  copies of all orders,
                  notices and communications to:

       Jeffrey C. Miller, Esq.      David R. McHale
       Assistant General Counsel    Vice President and Treasurer
       Northeast Utilities Service  Northeast Utilities Service
       Company                      Company
       107 Selden Street            107 Selden Street
       Berlin, CT 06037             Berlin, CT 06037


 The Application/Declaration in this File, as heretofore amended,
 is hereby further amended to include the following exhibit to Item 6:

ITEM 6

EXHIBITS AND FINANCIAL STATEMENTS

(a) Exhibits

          D.1 Decision from the Connecticut Department of Public
     Utility Control  dated December 12, 2001.

SIGNATURES

Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned companies have duly caused this
statement to be signed on their behalf by the undersigned thereunto
duly authorized.

NORTHEAST UTILITIES
WESTERN MASSACHUSETTS ELECTRIC COMPANY
THE CONNECTICUT LIGHT AND POWER COMPANY

By:	  /s/ Randy A. Shoop
Name:   Randy A. Shoop
Title:  Assistant Treasurer - Finance
        of Northeast Utilities Service Company
        as Agent for the above named companies.


Date: December 21, 2001


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>clpexh121201dec.txt
<DESCRIPTION>EXHIBIT DPUC DECISION 121201
<TEXT>

                       STATE OF CONNECTICUT


              DEPARTMENT OF PUBLIC UTILITY CONTROL
                       TEN FRANKLIN SQUARE
                      NEW BRITAIN, CT 06051



DOCKET  NO. 01-07-02   DPUC  REVIEW  OF  THE CONNECTICUT  LIGHT  AND
                       POWER  COMPANY'S CAPITAL STRUCTURE


                        December 12, 2001

                 By the following Commissioners:


                         Jack R. Goldberg
                         Donald W. Downes
                         Linda J. Kelly



                            DECISION


 <PAGE>





                            DECISION

I.   INTRODUCTION

A.   Summary

      The  Department approves the Company's recommended  capital
structure in this proceeding.  The Department requires that CL&P
periodically review its capital structure target against ongoing
industry and peer group capital structure studies.   If these
studies reveal that component changes to its target capital
structure can be financially beneficial, the Company is  required
to  pursue  these  findings accordingly.   In this regard, the
Department requires  that  CL&P's  ongoing  capital structure
strategies bring about appropriate financial benefit and that it
maintain or reduce its relative allowed cost of capital by the
Company's next rate hearing.

B.   Background of the Proceeding

      The  Connecticut Light and Power Company (CL&P or  Company)
maintained  common  equity capitalizations of 30.8%,  31.0%,  and
31.9% as of June 30, 2000, September 30, 2000, and December 31,
2000, respectively.  As of March 31, 2001, the Company's equity
percentage  increased to 33.7% due to retention of  earnings and
retirement  of  certain long-term debt issues  in  that  quarter.
Therefore, the Company's capital structure was comprised of 43.4%
equity (33.7% common equity and 9.7% preferred)<FN1>, and 56.6% debt,
just prior to the sale of the Millstone Nuclear Assets.  Response
to Interrogatory EL - 1, p. 2.

     In  a  January 31, 2001 letter to the Department  of  Public
Utility  Control (Department), the Company proposed a  method  of
compliance with Order No. 4, Docket No. 99-09-12REO1, Application
of  The  Connecticut  Light  and Power  Company  and  The  United
Illuminating  Company  for Approval of  Their  Millstone  Nuclear
Generation  Assets Divestiture Plans - Sale of Millstone  Station
to  Dominion Resources, Inc.  This letter addressed, among  other
things, the deployment of cash proceeds the Company would receive
on  or about April 1, 2001 from the sale of its Millstone Nuclear
Assets.  The Company's January 31 letter proposed using the  cash
from  the  Millstone  Asset Sale to achieve a  capital  structure
target of approximately 40% to 45% equity (including preferred).

     In  a  March  15, 2001 letter to the Company, the Department
temporarily required the Company to deploy the cash proceeds,  in
part,  to  result in a capital structure, including the  proposed
effects  of  securitization, to attain approximately 45% to 50%
common equity (excluding preferred).  It was also noted that the
Department would commence a proceeding to determine the capital
structure appropriate for CL&P post nuclear asset sale and make a
final ruling in this matter at the conclusion of such proceeding.
Further, the letter required CL&P to retain sufficient financial
flexibility  to adjust its capital structure as may be necessary
to  comply  with  Department findings at the  conclusion  of  the
proceeding.  Such proceeding commenced on July 5, 2001 under  the
instant docket.

C.   Conduct of the Proceeding

     The  Department initiated this proceeding to  determine  the
capital  structure appropriate for CL&P post nuclear asset  sale.
Accordingly,  by  a Notice of Hearing dated August  13,  2001,  a
public  hearing  was held on this matter at the  offices  of  the
Department,  Ten  Franklin Square, New  Britain,  Connecticut  on
September 17, 2001.  The hearing was continued to October 3, 2001
and was closed.

D.   Parties and Intervenors

      The  Department recognized The Connecticut Light and  Power
Company, P.  O. Box 270, Hartford, Connecticut 06141-0270;  the
Office  of  Consumer  Counsel (OCC),  Ten  Franklin  Square,  New
Britain,  Connecticut 06051; and the Office of  Attorney  General
(AG),  Ten  Franklin  Square, New Britain, Connecticut  06051  as
Parties  in this proceeding.  As a Party, the OCC submitted  pre-
filed  testimony and testified at the hearings as to its position
in this matter.

II.  POSITION OF PARTIES

A.   Company

     The Company provided its presently allowed capital structure
under  Docket  No.  99-03-36,  The  DPUC  Determination  of   The
Connecticut  Light  and  Power Company's  Standard  Offer.   Such
structure is comprised of 42.47% equity (34.93% common equity and
7.54%  preferred stock), and 57.53% total debt.  Calculating  the
weighted cost of each of these capital components, this structure
derives the Company's currently allowed weighted average cost  of
capital of 8.08%.  Response to Interrogatory EL - 2.

     CL&P  provided  various capital structure exhibits  breaking
out  individual  capital  components by  the  methodology  rating
agencies  use  to determine credit quality, or on a rating-agency
basis.   Response  to Interrogatory EL - 3.  On this  basis,  the
Company noted it has approximately $116 million of non-redeemable
perpetual  preferred  stock, which is about  8%  of  its  capital
structure, and that credit agencies view this part of its capital
structure as 100 percent equity quality.  Tr. 9/17/01, p. 26.

     The  Company also provided capital structure exhibits  on  a
rate-making  basis, which is the basis used in developing  CL&P's
cost of capital and revenue requirements.  CL&P indicated that it
excludes  from  debt some $198.8 million in prior  spent  nuclear
fuel  liability  to the United States Department  of  Energy  and
$16.3 million of capital leases, typically for computers, as they
are picked as cost of service items for ratemaking.  Tr. 9/17/01,
p. 7: Response to Interrogatory EL - 3, p. 2.  Accordingly, under
such basis, the percentage of equity in the capital structure  is
higher since debt levels have been reduced.

     The   Company  indicated  that  it  has  complied  with  the
Department's  March  15,  2001 letter,  which  required  CL&P  to
temporarily maintain a capital structure containing  45%  to  50%
equity  (excluding  preferred).  Tr.  9/17/01,  pp.  11  and  12;
Response to Interrogatory EL - 5, p. 1.  Accordingly, as of  June
30, 2001, CL&P's existing capitalization was as follows:

              CL&P Capital Structure June 30, 2001
                          ($ Millions)

                Rating Agency Basis           Rate-making Basis
                 Amount          %              Amount       %

Total debt       837.6       49.0%             622.5     41.6%
Preferred Stock  116.2        6.8%             116.2      7.8%
Common Equity    757.1       44.2%             757.1     50.6%

Total Capital  1,710.9      100.0%           1,495.8    100.0%

             Response  to Interrogatory  EL - 3, p. 2.

     In  this  proceeding, CL&P recommended  a  targeted  capital
structure  consisting  of 45% equity (37% common  equity and  8%
preferred), and 55% debt, on a rating agency basis.  Response  to
Interrogatory EL - 3, pp. 1 and 2.  On a rate-making basis, where
debt  is  reduced, CL&P's targeted common equity  position  alone
(excluding  preferred) was about 44% of capitalization.  Id.   On
both  bases,  CL&P's  targeted  capital  structure  is  shown  as
follows:

              CL&P Recommended Capital Structure
                          ($ Millions)

                Rating Agency Basis           Rate-making Basis
                 Amount          %              Amount       %

 Total debt      837.6       55.0%           622.5       47.6%
 Preferred Stock 116.2        8.0%           116.2        8.9%
 Common Equity   569.1       37.0%           569.1       43.5%

Total Capital  1,522.9      100.0%	       1,307.8      100.0%

               Response to Interrogatory  EL - 3, p. 2.

     CL&P    notes   that   its   specific   capital    structure
recommendation  is  premised  upon  a  capitalization  which:  a)
maintains  a strong "BBB" credit rating, b) provides the  Company
with  timely access to competitively priced capital, c)  provides
the  Company  with  a  degree of financial  flexibility,  and  d)
balances these factors in developing the lowest weighted  average
cost  of  capital  to  minimize capital cost for  its  customers.
Response  to Interrogatory EL - 3, p.1.  CL&P testified that  its
target should be considered a mid-point of a range that can  vary
by one to two percentage points.

      The  Company testified that its cost of capital  under  its
targeted structure on a rate-making basis will be as follows:

               CL&P Recommended Capital Structure
               Cost of Capital (Rate-making Basis)
                          ($ Millions)

                 Current                     Through end of 2003
                Amount    %     Cost          Amount    %      Cost

Total debt       622.5   47.6%  3.69%         622.5   47.6%    3.31%
Preferred Stock  116.2    8.9%  0.52%         116.2    8.9%    0.52%
Common Equity    569.1   43.5%  4.48%         569.1   43.5%    4.48%

Total Capital  1,307.8  100.0%  8.69%       1,307.8  100.0%    8.31%

       Response to Interrogatories EL - 3, p. 2; Response to
                  Interrogatory EL - 6, p. 1

     In  the  above  Responses,  the Company's  current  cost  of
capital includes CL&P's average cost of preferred stock and long-term
debt for the previous five quarters.  The Company's weighted
average cost of capital after September 30, 2002 through the  end
of  2003,  however, declines.  This is attributable to  the  fact
that  the  Company's cost of preferred stock and  long-term  debt
then stabilize and are based on its lower actual embedded cost of
as  June  30,  2001.  Response to Interrogatory EL  -  6,  p.  1;
Response to Interrogatory EL 9, p. 1; Tr. 9/17/01, p. 29.

     CL&P recommends its target capital structure rather than one
that maintains a higher investment in equity capital.  Increasing
the  Company's  equity ratio to attain an "A"  rating  would  not
result in a decline in its weighted average cost of capital.   In
particular,  the interest rate differential between the  cost  of
"A"  rated debt and high triple-B rated debt (40 basis-points for
a 30-year bullet bond according to Bridge Information Systems) in
the current financial market is too narrow to offset the cost  of
increasing  the  weighting  of  common  equity.   Company  Brief,
10/18/01, p. 5; Response to Interrogatory EL - 10.  Additionally,
CL&P  notes  that  its  weighted average cost  of  capital  would
actually  increase  if it were to issue a new 30-year  "A"  rated
bond, given current market conditions under its existing June  30
capitalization.  Company Brief, 10/18/01, pp. 5 and 6.

     Through  analysis, CL&P shows that under its  existing  June
30, 2001 capital structure (50.6% rate-making common equity), the
Company's  cost of capital is 8.89%. Projecting beyond  September
30,  2002 through the end of 2003, the Company's cost of  capital
declines  to  about  8.56% under a similar  structure.   However,
under  CL&P's targeted capital structure (44% rate-making  common
equity),  the cost of capital is lower and therefore  better,  at
8.69%,  and  8.31% beyond September 30, 2002 through the  end  of
2003.  Response  to  Interrogatory EL -  3,  p.  2;  Response  to
Interrogatory EL - 6, p. 1.

     Accordingly,   the   Company  recommends  implementing   its
targeted   capital   structure  requiring   the   buy   back   of
approximately $188 million of its stock from Northeast  Utilities
(NU).  Response  to  Interrogatory EL -  3,  p.  1;  Response  to
Interrogatory  EL  -  5,  pp. 1 and  2.   Moreover,  the  Company
recommends  moving toward its target in a prudent and  deliberate
manner,  over  a  number of quarters if necessary.   Response  to
Interrogatory EL - 3, p. 1.

B.   OCC

     OCC  recommended that the Department determine it is  proper
for  CL&P  to  keep its common equity ratio at approximately  the
same level used by the Department to compute the overall cost  of
capital in the last case (34.93%).  PFT, Rothschild, p. 6.   This
capital  structure  has preferred stock of  7.54%,  resulting  in
equity  of  about  42.47%  (including  preferred).   Response  to
Interrogatory EL - 2, p. 1.  However, OCC further indicated  that
since  financial  climates  change, the  approximate  35%  common
equity is not recommended indefinitely.  PFT, Rothschild, p.  10.
OCC  noted  that increasing the common equity ratio of CL&P  from
about 35% to 45%, or more, places ratepayers at too great a  risk
that  the  cost  of equity would not be lowered  sufficiently  to
offset  the higher revenue requirements associated with a  larger
percentage  of  common  equity in the  capital  structure.   PFT,
Rothschild, p. 6.

     OCC advocated that the proper capital structure for CL&P  is
one that produces the lowest overall cost of capital in the long-
run  while  still  allowing the company a  reasonable  amount  of
financial flexibility.  PFT, Rothschild, p. 5.  OCC notes that it
only  makes economic sense to increase the level of common equity
above that needed for financial integrity if the cost of debt and
the  cost  of  equity decline sufficiently to justify  using  the
extra  common equity.  Id.  OCC further cited that in  order  for
the  revenue requirements from a capital structure containing 45%
equity  and  55%  debt  to be the same as those  from  a  capital
structure containing 35% equity and 65% debt, the DPUC would have
to  allow  CL&P about 9.32% on its equity rather than  the  10.3%
currently allowed.  PFT, Rothschild, pp. 5 and 6, Schedule JAR 2.

     OCC  testified that an increase in the common equity  ratio,
other  things  being equal, would mean that the  cost  of  equity
would decline.  This would occur because financial risk goes down
when  the percentage of equity goes up.  Tr. 9/17/01, pp.  39-40.
The  OCC  noted, however, that it is difficult to  determine  how
commissions  will react ultimately to varying capital  structures
in setting the return on equity.  Tr. 10/3/01, pp. 97-99.

      OCC further indicated that the median capital structure  of
all  the  electric utilities included in the Eastern  Edition  of
Value  Line  contains  36.35%  common  equity,  and  about  2.49%
preferred.   Since  CL&P is a transmission and distribution  only
utility and some of the companies in the Eastern Edition of Value
Line also own generating stations, a comparison should expect  to
show  that  CL&P  would have a materially lower level  of  common
equity  in  its capital structure than the median in  the  group.
PFT, Rothschild, p. 7.

III. DEPARTMENT ANALYSIS

A.   Jurisdiction

     The Department first notes that CL&P maintains that there is
no  legal  jurisdiction for the Department  to  directly  mandate
adjustments to a utility's capital structure, other than  in  the
context  of a four-year financial review or rate case,  and  then
the  review is limited to whether the capital structure  produced
rates  that were more than just and reasonable.  The OCC believes
the  Department has broad legal power in this area  and  cites  a
number  of sections from Conn. Gen. Stat. Section 16-244 and 16-245
that broadly addresses the use of cash proceeds from generation plant
sales.   The  Department,  as economic  regulators,  clearly  has
jurisdiction  and  authority over this subject matter.   Further,
this  proceeding was noticed pursuant to Conn. Gen. Stat.  16-11,
which  specifically charges the Department to keep fully informed
as to the manner of operation of all public service companies and
to  order  any  changes  in the manner of  operation  as  may  be
reasonably  necessary  in  the  public  interest.   Further,  the
section  recites that its purpose is to "assure to the  state  of
Connecticut  its  full  powers  to regulate  its  public  service
companies,  to  increase the powers of the Department  of  Public
Utility  Control and . . . said section(s) shall be so  construed
as to effectuate these purposes."

     Although  the Department, in this Decision, is not  directly
mandating  changes to CL&P's capital structure, its authority  to
do  so  and its orders to the Company regarding capital structure
showings at the time of its next rate case are not in question.

B.   Economic Effects of Capital Structure Changes

     As noted in the Department's March 15, 2001 letter, CL&P had
testified  in Docket No. 99-09-12RE01 that for a utility  company
to  attain  an  "A" debt rating, it needs to move closer  to  50%
equity in its capital structure.  Tr. 11/27/00 (Docket No. 99-09-
12RE01),  pp.  1631  and  1632.  In such testimony,  the  Company
further  noted  that  attaining  an  "A"  debt  rating  would  be
advantageous  to CL&P as its cost of capital would decline.   Id.
Given  this testimony, and the considerable cash availability  in
CL&P attributable to the Millstone Asset Sale in April 2001, this
review   was  performed  to  determine  the  appropriate  capital
structure  for CL&P.  This proceeding was commenced  due  to  the
inherent responsibility of the Department to pursue any  and  all
matters that may potentially bring benefit to ratepayers and  the
Company.

     In  analyzing whether CL&P's common equity level  should  be
set  above  the  Company-recommended range, the  Department  must
first determine whether doing so would reduce the Company's  cost
of capital.  To accomplish this, the Department examined the debt
and equity components of the Company's capital structure.  On the
debt side, the Company has little or no long-term debt coming due
in  the  near future.  Response to Interrogatory EL - 12,  p.  1.
Therefore, it is unable to effectively benefit, in the near term,
from lower cost debt by attaining an "A" credit rating.  Even  if
an  "A"  rating  is attained, the 40 basis-point  spread  between
interest rates for an "A" versus a "BBB+" rating does not provide
much room for savings.

     On  the  equity  side, based on the evidence presented,  the
Department  finds that the relationship is somewhat uncertain  as
to how the level of equity affects ratings and the component cost
of  equity.   In analyzing cost of capital, the Company  made  no
adjustment to the component cost of equity (10.3%) in any of  its
exhibits.   This  was  the case even when such  cost  of  capital
analyses  were  of  capital structures having  considerably  more
equity  (44%  targeted and 50.6% as of June 30,  2001)  than  the
34.93% equity position that CL&P's 10.3% allowed return had  been
based upon.  Response to Interrogatory EL - 3, p. 2; Response  to
Interrogatory  EL  - 10, p. 3.  At the hearings,  the  Department
asked  the  Company for assistance in trying to  understand  this
important relationship.  However, the Company indicated that  its
assumption  in  this  proceeding  was  that  the  question  of  a
correlation  between the level of equity and the cost  of  equity
would  be  addressed  in  a rate filing  with  return  on  equity
witnesses.   Tr.  10/3/01, pp. 87 and 88.  In  this  regard,  OCC
testified  that  this cost would go down as the  equity  position
increased  attributable  to  the Company's  lower  risk  profile.
However, OCC also indicated that a significant reduction  in  the
component  cost  of  equity  and  debt  is  needed  to  make  the
additional investment in equity worthwhile.  Therefore, given the
marginal  potential  for a reduction in  the  cost  of  debt,  it
appears  unlikely that a benefit to the component cost of  equity
would  materialize  to the extent necessary  to  make  the  added
investment in equity worthwhile at this time.

     On  March  31, 2001, CL&P had an equity position  (including
preferred)  of  about 43.4%.  In the Company's January  31,  2001
letter, it proposed using the Millstone cash proceeds to  end  up
at  between 40% to 45% equity (including preferred).  As a result
of  this proceeding, the Company ultimately recommended an equity
position  of 45% (including preferred) in its capital  structure.
From  the  testimony submitted, it appears that a  higher  equity
investment  than  the  Company's recommendation  is  unlikely  to
result   in   a  net  benefit  given  CL&P's  present   financial
environment.   Accordingly,  the Department  concludes  that  the
Company's recommended capital structure is appropriate and allows
the  Company to proceed with its targeted course.  The Department
finds  that such capital structure will adequately protect CL&P's
financial  position.   Moreover,  since  targeted  common  equity
investment  increases only moderately to 37% versus CL&P's  33.7%
immediately prior to the Millstone Sale, it should not materially
affect  return on equity calculations going forward and therefore
customer  sharing  of  earnings  under  CL&P's  current  earnings
sharing mechanism (ESM).

     The  OCC  recommended  a capital structure  consistent  with
CL&P's  last  case (34.93% common equity, or about 42.47%  equity
(including  preferred)).   The Department  has  considered  OCC's
recommendation  carefully.  However, S&P credit  rating  criteria
submitted   by   the   Company   indicates   that   the   minimum
capitalization necessary for a company such as CL&P to maintain a
"BBB"   rating  is  55%  debt  and  45%  equity.    Response   to
Interrogatory  EL  -  20,  p.  3.   While  other   criteria   are
considered,  it  appears  advisable for  CL&P  to  maintain  such
minimum  threshold  (45%  equity  including  preferred)  in  this
component of the rating analysis.  Therefore, the Department does
not agree with OCC's proposal that would drop equity levels below
45%.

     However,  as  OCC has indicated, financial climates  change,
and  as  such  the Company's equity investment will  have  to  be
monitored.  Therefore,  while  the  Company's  recommendation  is
approved,  the  Department requires CL&P to maintain  appropriate
financial  flexibility and to periodically reconcile its  capital
structure target to minimize its cost of capital based on ongoing
industry  and  peer  group capital structure studies.   If  these
studies  reveal  that component changes, including  altering  its
investment  in  equity capital, are financially  beneficial,  the
Company  is  required to pursue these findings  accordingly.   In
this regard, the Company will be required to provide evidence  at
its  next  rate hearing supportive of the fact that  its  ongoing
capital structure strategies have resulted in the maintenance  or
reduction  of CL&P's allowed cost of capital after adjusting  for
any differential in the interest environment then existing.

IV.  FINDINGS OF FACT

1.   The  Department initiated this proceeding to  determine  the
     capital structure appropriate for CL&P post nuclear asset sale.

2.   CL&P's  currently allowed capital structure is comprised  of
     42.47% equity (34.93% common equity and 7.54% preferred stock),
     and 57.53% total debt.

3.   The Company's currently allowed cost of capital is 8.08%.

4.   CL&P  indicated  that debt of some $198.8 million  in  prior
     spent nuclear fuel liability and $16.3 million of capital leases,
     typically for computers, are excluded from debt on a rate-making
     basis as they are picked as cost of service items for ratemaking.

5.   CL&P's   targeted   capital  structure   is   comprised   of
     proportions of debt, preferred stock, and common equity to total
     capitalization of 55%, 8%, and 37%, respectively, on a rating-
     agency basis.

6.   CL&P's  target should be considered a mid-point of  a  range
     that can vary by one to two percentage points.

7.   CL&P    noted   that   its   specific   capital    structure
     recommendation is premised upon a capitalization  which:  a)
     maintains a strong "BBB" credit rating, b) provides the Company
     with timely access to competitively priced capital, c) provides
     the  Company with a degree of financial flexibility, and  d)
     balances these factors in developing the lowest weighted average
     cost of capital to minimize capital cost for its customers.

8.   The Company recommends moving toward its target in a prudent
     and deliberate manner, over a number of quarters if necessary.

9.   CL&P indicated that it has relatively little or no long-term
     debt coming due in the near future.

10.  Implementation  of  CL&P's targeted capital  structure  will
     require the buy back of approximately $188 million of its stock
     from NU.

11.  Per Bridge Information Systems, the interest differential in
     an  "A" versus a "BBB+" rated utility 30-year bullet bond is
     approximately 40 basis points.

12.  The OCC indicates in order for the revenue requirements from
     a capital structure containing 45% equity and 55% debt to be the
     same as those from a capital structure containing 35% equity and
     65% debt, the DPUC would have had to have allowed CL&P about
     9.32% on its equity instead of the 10.3% currently allowed.

13.  OCC  recommended the Department determine it is  proper  for
     CL&P to keep its common equity ratio at approximately the same
     level used by the Department to compute the overall cost  of
     capital in the last case (34.93%).

14.  OCC  indicated  that  since financial climates  change,  the
     approximate 35% common equity is not recommended indefinitely.

15.  OCC  testified that an increase in the common equity  ratio,
     other things being equal, would mean that the cost of equity
     would  decline  because financial risk goes  down  when  the
     percentage of equity goes up.

16.  Given  its  June 30, 2001 capital structure, CL&P noted  its
     cost of capital is 8.89%, and beyond September 30, 2002 through
     the end of 2003, 8.56%.

17.  CL&P's  targeted  structure derives a  cost  of  capital  of
     8.69%, and 8.31% beyond September 30, 2002 through the end of
     2003.

V.   CONCLUSION AND ORDERS

a.   Conclusion

      The  Department has reviewed the evidence and approves  the
Company's  recommended capital structure.  The  Department  finds
that  increasing common equity levels above CL&P's targeted range
will  not reduce the Company's cost of capital. Accordingly,  the
Department   concludes  that  the  Company's   proposed   capital
structure is appropriate.  The Department finds that such capital
structure  will  adequately  protect CL&P's  financial  position.
Moreover, since targeted common equity investment increases  only
moderately,  the  Company's recommended capital structure  should
not materially affect return on equity calculations going forward
and  therefore customer sharing of earnings under CL&P's  current
ESM.   The  Department requires, however, that CL&P  periodically
review its capital structure target against ongoing industry  and
peer  group  capital structure studies.  If these studies  reveal
that  component  changes to its target capital structure  can  be
financially  beneficial, the Company is required to pursue  these
findings  accordingly.  In this regard, the  Department  requires
that   CL&P's  capital  structure  strategies  bring  about  such
financial  benefit  and maintain or reduce its  relative  allowed
cost of capital by the Company's next rate hearing.

b.   Orders

1.   As  a  supplement  to its quarterly financial  reports,  the
     Department requires CL&P to provide, once annually, and not later
     than 90 days following the calendar year-end, a summary of its
     capital  position, and all detail surrounding  any  changes,
     adjustments, or reclassifications made to such capital structure
     during the calendar year.  The Company shall also provide the
     detail of its actual cost of capital under such structure.

2.   The  Department requires CL&P to provide at the time of  its
     next rate case a relevant summary of various industry and peer
     group capital structure studies available.  The Company shall
     reconcile  any  trends  in this information  against  CL&P's
     management of its capital structure.  Such reconciliation shall
     document  supportively  that the Company's  ongoing  capital
     structure strategies have minimized its cost of capital.






- --------------------------------
<FN>

<F1>   Due  to the characteristics of the Company's preferred stock,
  it  is  considered as equity by rating agencies for the purpose
  of establishing CL&P's credit ratings.

</FN>

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
