DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The electric and natural gas companies enter into contracts to purchase and procure energy and energy-related products for their customers, which are subject to price volatility. The costs associated with supplying energy to customers are recoverable from customers in future rates. These regulated companies manage the risks associated with the price volatility of energy and energy-related products through the use of derivative and non-derivative contracts. Many of the derivative contracts meet the definition of, and are designated as, normal and qualify for accrual accounting under the applicable accounting guidance. The costs and benefits of derivative contracts that meet the definition of normal are recognized in Operating Expenses on the statements of income as electricity or natural gas is delivered.

Derivative contracts that are not designated as normal are recorded at fair value as derivative assets or liabilities on the balance sheets. For the electric and natural gas companies, regulatory assets or regulatory liabilities are recorded to offset the fair values of derivatives, as contract amounts are recovered from, or refunded to, customers in their respective energy supply rates. The mark to market unrealized losses or gains of these derivative contracts are deferred as regulatory assets (if the derivative is a liability) or as regulatory liabilities (if the derivative is an asset).

The gross fair values of derivative assets and liabilities with the same counterparty are offset and reported as net Derivative Assets or Derivative Liabilities, with current and long-term portions, on the balance sheets. The following table presents the gross fair values of contracts, categorized by risk type, and the net amounts recorded as current or long-term derivative assets or liabilities:


		As of December 31,
		2025						2024
(Millions of Dollars)	Fair Value Hierarchy	Commodity Supply and Price Risk Management		Netting (1)		Net Amount Recorded as a Derivative		Commodity Supply and Price Risk Management		Netting (1)		Net Amount Recorded as a Derivative
Current Derivative Assets:
CL&P	Level 2	$	—	$	—	$	—	$	14.2	$	(0.3)	$	13.9
NSTAR Electric	Level 3	91.0		—		91.0		—		—		—


Current Derivative Liabilities:
CL&P	Level 2	(0.1)		—		(0.1)		(71.1)		—		(71.1)

Long-Term Derivative Liabilities:

NSTAR Electric	Level 3	(753.1)		—		(753.1)		—		—		—

(1) Amounts represent derivative assets and liabilities that Eversource elected to record net on the balance sheets. These amounts are subject to master netting agreements or similar agreements for which the right of offset exists.

Derivative Contracts at Fair Value with Offsetting Regulatory Amounts

Commodity Supply and Price Risk Management: In accordance with Massachusetts clean energy legislation and under the Massachusetts Clean Energy 83D procurement, in June 2018, NSTAR Electric entered into a 20-year power purchase agreement for the purchase of renewable hydroelectric energy and renewable energy attributes from Hydro-Québec. The agreement requires NSTAR Electric to purchase 579 MW of energy per hour through January 2046. Upon notice of commercial operation of the transmission line needed to deliver this energy, received on December 31, 2025, the power purchase agreement was marked to market on the balance sheet. The current and long-term portions of the contract were recorded as derivative assets and derivative liabilities, respectively, and were offset by current and long-term regulatory liabilities and regulatory assets, respectively, reflecting full recovery from or refund to NSTAR Electric’s customers.

As required by regulation, CL&P, along with UI, has capacity-related contracts with generation facilities. CL&P has a sharing agreement with UI, with 80 percent of the costs or benefits of each contract borne by or allocated to CL&P and 20 percent borne by or allocated to UI. The combined capacities of these contracts as of December 31, 2025 and 2024 were 3 MW and 610 MW, respectively. The capacity contracts extend through 2026 and obligate both CL&P and UI to make or receive payments on a monthly basis to or from the generation facilities based on the difference between a set capacity price and the capacity market price received in the ISO-NE capacity markets.

For the years ended December 31, 2025, 2024 and 2023, losses from changes in fair value associated with these derivative contracts of $662.9 million, $3.8 million and $3.9 million, respectively, were deferred in Regulatory Assets or Regulatory Liabilities on the balance sheet.

Fair Value Measurements of Derivative Instruments

The fair value of derivative contracts utilizes both observable and unobservable inputs. The fair value is modeled using income techniques, such as discounted cash flow valuations adjusted for assumptions related to exit price. Valuations of derivative contracts using a discounted cash flow methodology include assumptions regarding future energy and energy-related prices, the timing and likelihood of scheduled payments, selection of a discount rate, and also reflect non-performance risk, including credit, using the default probability approach based on the counterparty’s credit rating for assets and the Company’s credit rating for liabilities. Valuations also give consideration to premiums or discounts that would be required by a market participant to arrive at an exit price. Future energy prices that are not quoted in an active market are based on available market data with assumptions of future market dynamics and inflation to address the full time period of the contract. Fair value measurements are prepared and reviewed by individuals with expertise in valuation techniques, pricing of energy-related products, and accounting requirements.

For NSTAR Electric’s derivative contract, unobservable inputs for future energy prices using a forward electricity bid price curve are significant to the valuation and are classified as Level 3. As of December 31, 2025, Level 3 unobservable inputs utilized in the valuation of NSTAR Electric’s power purchase agreement include energy prices ranging from $24.65 per MWh through $145.33 per MWh, or a weighted average of $53.44 per MWh, over the contractual period of 2026 through 2046.

For CL&P derivative contracts, observable inputs for energy-related product prices in future years for which quoted prices in an active market exist are significant to the valuation and are classified as Level 2.

The following table presents changes in the Level 3 category of derivative assets and derivative liabilities measured at fair value on a recurring basis. The derivative assets and liabilities are presented on a net basis.


NSTAR Electric (Millions of Dollars)	For the Year Ended
	December 31, 2025
Derivatives, Net:
Fair Value as of Beginning of Year	$	—
Net Realized/Unrealized Losses Included in Regulatory Assets or Regulatory Liabilities	(662.1)
Settlements	—
Fair Value as of End of Year	$	(662.1)

- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

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+ Details

EVERSOURCE ENERGY 10-K