UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The number of shares outstanding of the registrant's class of common stock was 100 shares, par value $1 per share, as of May 6, 2011.  

NSTAR Electric Company

Form 10-Q

Quarterly Period Ended March 31, 2011

Table of Contents

1

Glossary of Terms

The following is a glossary of abbreviated names or acronyms frequently used throughout this report.

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Cautionary Statement Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q contains statements that are considered forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.  These forward-looking statements may also be contained in other filings with the SEC, in press releases, and oral statements.  You can identify these statements by the fact that they do not relate strictly to historical or current facts.  These statements contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance.  These statements are based on the current expectations, estimates or projections of management and are not guarantees of future performance.  Some or all of these forward-looking statements may not turn out to be what NSTAR Electric expected.  Actual results could differ materially from these statements.  Therefore, no assurance can be given that the outcomes stated in such forward-looking statements and estimates will be achieved.

Examples of some important factors that could cause our actual results or outcomes to differ materially from those discussed in the forward-looking statements include, but are not limited to, the following:

Any forward-looking statement speaks only as of the date of this filing and NSTAR Electric undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise.  You are advised, however, to consult all further disclosures NSTAR Electric makes in its filings to the SEC.  Other factors in addition to those listed here could also adversely affect NSTAR Electric.  This Quarterly Report also describes material contingencies and critical accounting policies and estimates in the accompanying Part I, Item 2, "Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Part II, Item 1A, “Risk Factors” and in the accompanying Part 1, Item 1, Notes to Condensed Consolidated Financial Statements and NSTAR Electric encourages a review of these items.

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Part I.  Financial Information

Item 1.  Financial Statements

NSTAR Electric Company

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands)

Per share data is not relevant because NSTAR Electric Company's common stock is wholly owned by NSTAR.

The accompanying notes are an integral part of the condensed consolidated financial statements.

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NSTAR Electric Company

Condensed Consolidated Statements of Retained Earnings

(Unaudited)

(in thousands)

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

NSTAR Electric Company

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

The accompanying notes are an integral part of the condensed consolidated financial statements.

6

NSTAR Electric Company

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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NSTAR Electric Company

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

The accompanying notes should be read in conjunction with Notes to Consolidated Financial Statements included in NSTAR Electric's 2010 Annual Report on Form 10-K.

Note A. Business Organization and Summary of Significant Accounting Policies

1. About NSTAR Electric

NSTAR Electric Company (NSTAR Electric or the Company) is a regulated public utility incorporated in 1886 under Massachusetts law and is a wholly-owned subsidiary of NSTAR.  NSTAR Electric serves approximately 1.1 million electric distribution customers in the City of Boston and 80 surrounding communities.  NSTAR is a holding company engaged through its subsidiaries in the energy delivery business serving approximately 1.4 million customers in Massachusetts, including NSTAR Electric’s customers and approximately 300,000 natural gas distribution customers of NSTAR Gas in 51 communities.  NSTAR has a service company that provides management and support services to substantially all NSTAR subsidiaries - NSTAR Electric & Gas.

Harbor Electric Energy Company (HEEC), a wholly-owned subsidiary of NSTAR Electric, provides distribution service and ongoing support to its only customer, the Massachusetts Water Resources Authority's wastewater treatment facility located on Deer Island in Boston, Massachusetts.  NSTAR Electric’s three wholly-owned consolidated special-purpose subsidiaries are BEC Funding LLC, BEC Funding II LLC, and CEC Funding LLC, all established to facilitate the sales of electric rate reduction certificates at a public offering.  The certificates of all special-purpose subsidiaries are secured by a portion of the transition charge assessed on NSTAR Electric's retail customers as permitted by the 1997 Massachusetts Electric Restructuring Act and authorized by the DPU.  The activities of BEC Funding LLC were substantially completed as of March 31, 2010 and the Company was dissolved on April 14, 2010.

2.  Pending Merger with Northeast Utilities

On October 16, 2010, upon unanimous approval from their respective Boards of Trustees, NSTAR and Northeast Utilities (NU) entered into an Agreement and Plan of Merger (the Merger Agreement). The transaction will be a merger of equals in a stock-for-stock transfer.  Upon the terms and subject to the conditions set forth in the Merger Agreement at closing, NSTAR will become a wholly-owned subsidiary of NU. The combined company will provide electric and gas energy delivery services through six regulated electric and gas utilities in Connecticut, Massachusetts and New Hampshire serving nearly 3.5 million electric and gas customers.

Under the terms of the agreement, NSTAR shareholders will receive 1.312 NU common shares for each NSTAR common share that they own. Following completion of the merger, it is anticipated that NU shareholders will own approximately 56 percent and former NSTAR shareholders will own approximately 44 percent of the combined company.  On March 4, 2011, shareholders of each company approved the merger and adopted the merger agreement.  Completion of the merger is subject to various customary conditions, including receipt of required regulatory approvals.

Regulatory Approvals on Pending Merger with Northeast Utilities

      Federal

On January 4, 2011, NSTAR and NU received approval from the Federal Communications Commission, and on February 10, 2011, the applicable Hart-Scott-Rodino waiting period expired.  On January 7, 2011, NSTAR and NU filed an application with the Federal Energy Regulatory Commission (FERC), requesting

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approval of the merger by May 10, 2011.  A filing was made with the Nuclear Regulatory Commission on December 9, 2010.  

      Massachusetts

On November 24, 2010, NSTAR and NU filed a joint petition requesting the DPU’s approval of their proposed merger.  On March 10, 2011, the DPU issued an order that modified the standard of review to be applied in the review of mergers involving Massachusetts utilities from a “no net harm” standard to a “net benefits” standard, meaning that the companies must demonstrate that the pending transaction provides benefits that outweigh the costs.  Applicable state law provides that mergers of Massachusetts utilities and their respective holding companies must be “consistent with the public interest.”  The order states that the DPU has flexibility in applying the factors applicable to the standard of review.  NSTAR and NU filed supplemental testimony with the DPU on April 8, 2011 indicating the merger could provide net savings for the combined companies of an estimated $780 million in the first ten years following the closing of the merger and provide other customer benefits.  Evidentiary hearings are scheduled to begin on July 6, 2011.  NSTAR and NU expect a ruling from the DPU in the second half of 2011.

     Connecticut

In November 2010, the Connecticut Department of Public Utility Control (DPUC) issued a draft decision finding that it lacks jurisdiction to consider the NSTAR Merger with NU.  In December 2010, the Connecticut Office of Consumer Counsel (OCC) petitioned the DPUC to reconsider its draft decision.  On January 26, 2011, the DPUC issued an Administrative Order stating that it would hold a hearing on the question of jurisdiction.  In February 2011, oral arguments were held and in March 2011, a public information session on the merger was held.  No date has been established for a final decision.  In addition, legislation proposing to give the DPUC jurisdiction over the merger received a joint favorable recommendation from the Connecticut Joint Legislative Energy and Technology Committee in March 2011.

     New Hampshire

On April 5, 2011, the New Hampshire Public Utilities Commission (NHPUC) issued an order finding that it does not have statutory authority to approve or reject the merger.

     Maine

NSTAR and NU are also asking Maine regulators to waive jurisdiction over the merger.  Although neither NSTAR nor NU subsidiaries serve any customers in Maine, Public Service Company of New Hampshire, an NU subsidiary, owns transmission assets in the state that are subject to the jurisdiction of the Maine Public Utilities Commission.  On April 15, 2011, a hearing examiner issued a report rejecting the waiver request, but approving the merger contingent upon approval by the FERC.  

3. Basis of Consolidation and Accounting

The accompanying condensed consolidated financial information presented as of March 31, 2011 and for the three-month periods ended March 31, 2011 and 2010 has been prepared from NSTAR Electric's books and records without audit by an independent registered public accounting firm.  However, NSTAR Electric's independent registered public accounting firm has performed a review of these interim financial statements in accordance with standards established by the PCAOB.  The review report is filed as Exhibit 99.1 to this Form 10-Q.  Financial information as of December 31, 2010 was derived from the audited consolidated financial statements of NSTAR Electric, but does not include all disclosures required by GAAP.  In the opinion of NSTAR Electric's management, all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial information for the periods indicated, have been included.  All significant intercompany transactions have been eliminated in consolidation.  

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NSTAR Electric follows accounting policies prescribed by the FERC and the DPU.  In addition, NSTAR Electric and its subsidiaries are subject to the accounting and reporting requirements of the SEC.  NSTAR Electric is subject to the application of ASC 980, Regulated Operations, that considers the effects of regulation resulting from differences in the timing of recognition of certain revenues and expenses from those of other businesses and industries. The distribution and transmission businesses are subject to rate-regulation that is based on cost recovery and meets the criteria for application of ASC 980.

The preparation of financial statements in conformity with GAAP requires management of NSTAR Electric and its subsidiaries to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The results of operations for the three-month periods ended March 31, 2011 and 2010 are not indicative of the results that may be expected for an entire year. The demand for electricity is affected by weather conditions, economic conditions, and consumer conservation behavior.  Electric energy sales and revenues are typically higher in the winter and summer months than in the spring and fall months.

4.  Pension and Postretirement Benefits Other than Pensions (PBOP) Plans

NSTAR Electric’s net periodic Pension Plan and PBOP Plan benefit costs for the first quarter are based on the latest available participant census data.  An annual actuarial valuation will be completed during the second quarter, and cost estimates will be adjusted based on the actual actuarial study results.

NSTAR Electric’s Pension Plan and PBOP Plan assets are affected by fluctuations in the financial markets.  Fluctuations in the fair value of the Pension Plan and PBOP Plan assets impact the funded status, accounting costs, and cash funding requirements of these Plans. The earnings impact of increased Pension and PBOP costs is substantially mitigated by NSTAR Electric’s DPU-approved Pension and PBOP rate adjustment mechanism (PAM).  Under the PAM, NSTAR Electric recovers its pension and PBOP expense through a reconciling rate mechanism.  The PAM removes the volatility in earnings that could result from fluctuations in market conditions and plan experience.

Pension

NSTAR Electric sponsors the NSTAR Pension Plan (the Plan) that covers substantially all employees.  As its sponsor, NSTAR Electric allocates the costs of the Plan to NSTAR Electric & Gas. NSTAR Electric & Gas charges all of its benefit costs to the NSTAR operating companies, including NSTAR Electric, on the proportion of total direct labor charged to its operating companies.  During the three months ended March 31, 2011, NSTAR contributed $32 million to the Plan.  In addition, $6 million was contributed in April 2011.  NSTAR currently anticipates making additional contributions of approximately $37 million to the Plan during the remainder of 2011.  The actual level of funding may differ from this estimate.

Components of net periodic pension benefit cost were as follows:

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Postretirement Benefits Other than Pensions

NSTAR also provides health care and other benefits to retired employees who meet certain age and years of service eligibility requirements.  Under certain circumstances, eligible retirees are required to contribute to the costs of postretirement benefits.

To fund these postretirement benefits, NSTAR, on behalf of NSTAR Electric and other NSTAR subsidiaries, makes contributions to various VEBA trusts that were established pursuant to section 501(c)(9) of the Internal Revenue Code.

NSTAR Electric participates in the Plan trusts with other NSTAR subsidiaries.  Plan assets are available to provide benefits for all Plan participants who are former employees of NSTAR Electric and other subsidiaries of NSTAR.  During the three months ended March 31, 2011, NSTAR contributed $7.2 million to this plan.  In addition, $2.4 million was contributed in April 2011. NSTAR currently anticipates contributing approximately $20.4 million for the remainder of 2011 toward these benefits.  NSTAR Electric will fund approximately $5.8 million, $1.9 million, and $16.5 million of these amounts, respectively.  

The net periodic postretirement benefit cost allocated to NSTAR Electric for the three-month period ended March 31, 2011 was $7.6 million, as compared to $8 million in the three-month period ended March 31, 2010.

4.   Interest Income and Other, net

Major components of interest income and other, net were as follows:

5. Variable Interest Entities

NSTAR Electric has certain long-term purchase power agreements with energy facilities where it purchases substantially all of the output from a specified facility for a specified period and has determined these agreements represent variable interests.  NSTAR Electric is not considered the primary beneficiary of these entities and does not consolidate the entities because it does not control the activities most relevant to the operating results of these entities and does not hold any equity interests in the entities.  NSTAR Electric’s exposure to risks and financial support commitments with respect to these entities is limited to the purchase of the power generated at the prices defined under the contractual agreements.  NSTAR Electric’s involvement with these variable interest entities has no material impact on NSTAR Electric’s financial position, financial performance, or cash flows.

6. Subsequent Events

Management has reviewed subsequent events through the date of this filing and concluded that no material subsequent events have occurred that are not accounted for in the accompanying Condensed Consolidated Financial Statements or disclosed in the accompanying Notes to Condensed Consolidated Financial Statements.

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Note B.  Derivative Instruments

     Energy Contracts

NSTAR Electric has determined that it is not required to account for the majority of its electricity supply contracts as derivatives because they qualify for, and NSTAR Electric has elected, the normal purchases and sales exception.  As a result, these agreements are not reflected on the accompanying Condensed Consolidated Balance Sheets.  NSTAR Electric has a long-term renewable energy contract that does not qualify for the normal purchases and sales exception and is valued at an estimated $2.1 million and $2.4 million liability as of March 31, 2011 and December 31, 2010, respectively.  NSTAR Electric has measured the difference between the cost of this contract and projected market energy costs over the life of the contract, and recorded a long-term derivative liability and a corresponding long-term regulatory asset for the value of this contract.  Changes in the value of the contract have no impact on earnings.  The fair value of the renewable energy contract deemed to be a derivative was as follows:

Note C. Income Taxes

Effective Tax Rate

NSTAR Electric is part of a consolidated tax group.  As such, income tax payments are either due to or from NSTAR (Holding Company).

The following table reconciles the statutory Federal income tax rate to the annual estimated effective income tax rate for 2011 and the actual effective income tax rate for the year ended December 31, 2010:

Receipt of Federal Tax Refund for 2001-2007 Tax Years

On September 30, 2010, NSTAR accepted a settlement offer from the IRS Office of Appeals on issues related to its 2001-2007 Federal income tax returns.  NSTAR received notification on January 3, 2011 that the Joint Committee approved the Settlement Agreement.  On April 21, 2011, NSTAR Electric received a refund of approximately $164 million relating to the 2001-2007 tax years.  The approved settlement and receipt of the refund resolves all outstanding tax matters for these years.

Open Tax Years

The 2008 and 2009 Federal income tax returns have been examined under the IRS Compliance Assurance Process (CAP) with no adjustments. The 2010 Federal income tax return is being reviewed under CAP. This program accelerates the examination of the return in an attempt to resolve issues before the tax return is filed. The outcome of any potential audit adjustments and the timing are uncertain.

Uncertain Tax Positions

NSTAR Electric did not have a reserve for uncertain tax positions at March 31, 2011 and December 31, 2010.

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Interest on Tax Positions

The total amount of accrued interest receivable related to tax matters included in “Other current assets” on the accompanying Condensed Consolidated Balance Sheets was as follows:

Substantially all of the $33.1 million in accrued tax interest receivable at March 31, 2011 was collected in the April 21, 2011 refund.

Note D.  Fair Value Measurements

NSTAR Electric discloses fair value measurement pursuant to a framework for measuring fair value in accordance with GAAP.  NSTAR Electric follows a fair value hierarchy that prioritizes the inputs used to determine fair value and requires the Company to classify assets and liabilities carried at fair value based on the observability of these inputs.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  The three levels of the fair value hierarchy are:

Level 1 – Unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date.  Financial assets utilizing Level 1 inputs include active exchange-traded equity securities.

Level 2 – Quoted prices available in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are directly observable, and inputs derived principally from market data.

Level 3 – Unobservable inputs from objective sources.  These inputs may be based on entity-specific inputs. Level 3 inputs include all inputs that do not meet the requirements of Level 1 or Level 2.

The renewable energy contract was valued based on the difference between the contracted price and the estimated fair value of remaining contracted supply to be purchased.  Inputs used to develop the estimate included on-line regional generation and forecasted demand.

The following represents the fair value hierarchy of NSTAR Electric’s financial liability that was recognized at fair value on a recurring basis as of March 31, 2011 and December 31, 2010.  Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

(a)  -  Included in “Deferred credits and other liabilities: Power contract obligations” on the accompanying          Condensed Consolidated Balance Sheets

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Fair Value of Financial Instruments

The carrying amounts for cash and cash equivalents, net accounts receivable, other current assets, certain current liabilities, and notes payable as of March 31, 2011 and December 31, 2010, respectively, approximate fair value due to the short-term nature of these securities.

The fair values of long-term indebtedness (excluding notes payable, including current maturities) are based on the quoted market prices of similar issues.  Carrying amounts and fair values as of March 31, 2011 and December 31, 2010 were as follows:

Note E. Commitments and Contingencies

1.  Service Quality Indicators

SQI are established performance benchmarks for certain identified measures of service quality relating to customer service and billing performance, safety and reliability and DPU Consumer Division statistics performance for all Massachusetts utilities.  NSTAR Electric is required to report annually to the DPU concerning its performance as to each measure and is subject to maximum penalties of up to two and one-half percent of total transmission and distribution revenues should performance fail to meet the applicable benchmarks.  

NSTAR Electric monitors its service quality continuously, and if it is probable that a liability has been incurred and is estimable, a liability is accrued.  Any settlement or rate order that would result in a different liability level from what has been accrued would be adjusted in the period that the DPU issues an order determining the amount of any such liability.

NSTAR Electric’s service quality performance levels for 2010 were not in a penalty situation and the final performance report was filed with the DPU on March 1, 2011.

2.  Environmental Matters

NSTAR Electric faces possible liabilities as a result of involvement in several multi-party disposal sites, state-regulated sites or third party claims associated with contamination remediation.  NSTAR Electric generally expects to have only a small percentage of the total potential liability for the majority of these sites.  As of March 31, 2011 and December 31, 2010, NSTAR Electric had liabilities of $0.9 million for these environmental sites.  This estimated recorded liability is based on an evaluation of all currently available facts with respect to these sites.  

Estimates related to environmental remediation costs are reviewed and adjusted as further investigation and assignment of responsibility occurs and as either additional sites are identified or NSTAR Electric's responsibilities for such sites evolve or are resolved.  NSTAR Electric's ultimate liability for future environmental remediation costs may vary from these estimates.  Based on NSTAR Electric's current assessment of its environmental responsibilities, existing legal requirements, and regulatory policies, NSTAR Electric does not believe that these environmental remediation costs will have a material adverse effect on NSTAR Electric's consolidated results of operations, financial position, or cash flows.

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3.  Regulatory Proceedings

DPU Safety and Reliability Programs (CPSL)

As part of the Rate Settlement Agreement, NSTAR Electric is allowed to recover incremental costs related to the double pole inspection, replacement/restoration and transfer program and the underground electric safety program, which includes stray-voltage remediation and manhole inspections, repairs, and upgrades.  Recovery of these Capital Program Scheduling List (CPSL) billed costs is subject to DPU review and approval.  From 2006 through 2010, NSTAR Electric incurred and billed cumulative incremental revenue requirements of approximately $67 million.  During 2011, approximately $3.5 million has been incurred through March 31.  These amounts include incremental operations and maintenance and revenue requirements on capital investments.  

On May 28, 2010, the DPU issued an order on NSTAR Electric’s 2006 CPSL costs recovery filing.  The expected recovery amount did not vary materially from the revenue previously recognized.  On October 8, 2010, NSTAR Electric submitted a Compliance Filing with the DPU reconciling the recoverable CPSL Program revenue requirement for each year 2006 through 2009 with the revenues already collected to determine the proposed adjustment effective on January 1, 2011.  The DPU allowed the proposed rates to go into effect on that date, subject to reconciliation of program costs.  NSTAR Electric cannot predict the timing of subsequent DPU orders related to this filing.  Should an adverse DPU decision be issued, it could have a material adverse impact on NSTAR Electric’s result of operations, financial position, and cash flows.

Basic Service Bad Debt Adder

On July 1, 2005, in response to a generic DPU order that required electric utilities in Massachusetts to recover the energy-related portion of bad debt costs in their Basic Service rates, NSTAR Electric increased its Basic Service rates and reduced its distribution rates for those bad debt costs.  In furtherance of this generic DPU order, NSTAR Electric included a bad debt cost recovery mechanism as a component of its Rate Settlement Agreement.  This recovery mechanism (bad debt adder) allows NSTAR Electric to recover its Basic Service bad debt costs on a fully reconciling basis.  These rates were implemented, effective January 1, 2006, as part of NSTAR Electric’s Rate Settlement Agreement.

On February 7, 2007, NSTAR Electric filed its 2006 Basic Service reconciliation with the DPU proposing an adjustment related to the increase of its Basic Service bad debt charge-offs.  This proposed rate adjustment was anticipated to be implemented effective July 1, 2007.  On June 28, 2007, the DPU issued an order approving the implementation of a revised Basic Service rate.  However, the DPU instructed NSTAR Electric to reduce distribution rates by the increase in its Basic Service bad debt charge-offs. Such action would result in a further reduction to distribution rates from the adjustment NSTAR Electric made when it implemented the Settlement Agreement.  This adjustment to NSTAR Electric’s distribution rates would eliminate the fully reconciling nature of the Basic Service bad debt adder.

NSTAR Electric has not implemented the directives of the June 28, 2007 DPU order.  Implementation of this order would require NSTAR Electric to write-off a previously recorded regulatory asset related to its Basic Service bad debt costs.  NSTAR Electric filed a Motion for Reconsideration of the DPU’s order on July 18, 2007.  On May 28, 2010, the DPU issued an order and reaffirmed that NSTAR Electric should reduce its distribution rates by the increase in its Basic Service bad debt charge-offs.  On June 18, 2010, NSTAR Electric filed an appeal of the DPU’s order with the Massachusetts Supreme Judicial Court (SJC).  A decision by the SJC is expected in late 2011.  As of March 31, 2011, the potential pre-tax impact to earnings of eliminating the bad debt adder would be approximately $23 million.  NSTAR Electric cannot predict the timing of this appeals process.  NSTAR Electric continues to believe that its position is appropriate and that it is probable upon appeal that it will ultimately prevail.

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Other

In the fourth quarter of each year, NSTAR Electric files proposed distribution rate adjustments for effect on the following January 1.  These rate adjustments include a SIP rate factor and several other fully reconciling cost recovery items.  Consistent with previous filings, the 2010 filings include a combination of actual and forecasted data for 2010 that NSTAR Electric will update during 2011 with year-end data to allow a final investigation and reconciliation.  There are several case years that remain outstanding at the DPU.  These cases are pending decisions at the DPU and NSTAR Electric cannot predict the timing or the ultimate outcome of these filings.

4.  Yankee Companies Spent Fuel Litigation

In October 2006, the U.S. Court of Federal Claims issued a judgment in a spent nuclear fuel litigation in the amounts of $34.2 million, $32.9 million, and $75.8 million for CY, YA, and MY, respectively.  This judgment in favor of the Yankee Companies relates to the alleged failure of the Department of Energy (DOE) to provide for a permanent facility to store spent nuclear fuel for years prior to 2001 for CY and YA, and prior to 2002 for MY (DOE Phase I Damages).  NSTAR Electric’s portion of the Phase I judgments amounts to $4.8 million, $4.6 million, and $3 million, respectively.  The DOE appealed this decision to the United States Court of Appeals for the Federal Circuit that affirmed in part and reversed in part the awards of the earlier Phase I judgments. The Court of Federal Claims issued a decision on remand on September 7, 2010, which determined that the net damage awards are to be amended against the DOE in the amounts of $39.7 million, $21.2 million, and $81.7 million for CY, YA, and MY, respectively. NSTAR Electric’s portion of the appealed judgments amounts to $5.6 million, $3 million, and $3.3 million, respectively. The DOE filed notice of its appeal of the decision on remand to the United States Court of Appeals for the Federal Circuit on November 8, 2010, and the Yankee Companies filed their notice of cross-appeal on a limited issue on November 19, 2010. The DOE’s brief on appeal was filed February 4, 2011. A final decision on this appeal could be received by March 2012.

On July 1, 2009, the Yankee Companies filed for additional damages related to the alleged failure of the DOE to provide for a permanent facility to store spent nuclear fuel for the years from January 2002 through December 2008 for CY and YA, and from January 2003 through December 2008 for MY (DOE Phase II Damages). This phase of the spent nuclear fuel litigation specifies damages in the amounts of $135.4 million, $86.1 million, and $43 million for CY, YA, and MY, respectively. Claim amounts applicable to NSTAR Electric are $19 million, $12 million, and $1.7 million, respectively.

NSTAR Electric cannot predict the ultimate outcome of these pending decisions for trial, appeal or the potential subsequent complaints. However, should the Yankee Companies ultimately prevail, NSTAR Electric’s share of the proceeds received would be refunded to its customers.

5.  Legal Matters

In the normal course of its business, NSTAR Electric and its subsidiaries are involved in certain legal matters, including civil litigation.  Management is unable to fully determine a range of reasonably possible court-ordered damages, settlement amounts, and related litigation costs (“legal liabilities”) that would be in excess of amounts accrued and amounts covered by insurance.  Based on the information currently available, NSTAR Electric does not believe that it is probable that any such legal liabilities will have a material impact on its consolidated financial position.  However, it is reasonably possible that additional legal liabilities that may result from changes in circumstances could have a material impact on its results of operations, financial condition, and cash flows.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

The accompanying MD&A focuses on factors that had a material effect on the financial condition, results of operations, and cash flows of NSTAR Electric during the periods presented and should be read in

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conjunction with the accompanying condensed consolidated financial statements and related notes, and with the MD&A in NSTAR Electric's 2010 Annual Report on Form 10-K.

Business Overview

NSTAR Electric Company is a regulated public utility incorporated in 1886 under Massachusetts law and is a wholly-owned subsidiary of NSTAR.  NSTAR Electric serves approximately 1.1 million electric distribution customers in the City of Boston and 80 surrounding communities.  NSTAR is a holding company engaged through its subsidiaries in the energy delivery business serving approximately 1.4 million customers in Massachusetts, including NSTAR Electric's customers and approximately 300,000 natural gas distribution customers of NSTAR Gas in 51 communities.  NSTAR has a service company that provides management and support services to substantially all NSTAR subsidiaries - NSTAR Electric & Gas.  

Harbor Electric Energy Company (HEEC), a wholly owned-subsidiary of NSTAR Electric, provides distribution service and ongoing support to its only customer, the Massachusetts Water Resources Authority's wastewater treatment facility located on Deer Island in Boston, Massachusetts.  NSTAR Electric's three wholly-owned consolidated special-purpose subsidiaries are BEC Funding LLC (BEC Funding), BEC Funding II, LLC (BEC Funding II) and CEC Funding, LLC (CEC Funding), all established to facilitate the sales of electric rate reduction certificates at a public offering.  The certificates of all special-purpose subsidiaries are secured by a portion of the transition charge assessed on NSTAR Electric's retail customers as permitted by the 1997 Massachusetts Electric Restructuring Act and authorized by the DPU.  These certificates are non-recourse to NSTAR Electric.  NSTAR Electric has no variable interest entities.  The activities of BEC Funding LLC were substantially completed as of March 31, 2010 and the Company was dissolved on April 14, 2010.

NSTAR Electric derives its operating revenues primarily from the sale of energy, distribution, transmission, and energy efficiency services to customers.  However, NSTAR Electric's earnings are impacted by fluctuations in unit sales of electric kWh, which have an effect on the level of distribution and transmission revenues recognized.  In accordance with the regulatory rate structure in which NSTAR Electric operates, its recovery of energy and certain energy-related costs are fully reconciled with the level of energy revenues currently recorded and, therefore, do not have an impact on earnings.  As a result of this rate structure, any variability in the cost of energy supply purchased will have an impact on purchased power and transmission expenses, but will not affect the Company's net income as the Company recognizes a corresponding change in revenues.

Pending Merger with Northeast Utilities

On October 16, 2010, upon unanimous approval from their respective Boards of Trustees, NSTAR and Northeast Utilities (NU) entered into an Agreement and Plan of Merger (the Merger Agreement). The transaction will be a merger of equals in a stock-for-stock transfer.  Upon the terms and subject to the conditions set forth in the Merger Agreement at closing, NSTAR will become a wholly-owned subsidiary of NU. The combined company will provide electric and gas energy delivery services through six regulated electric and gas utilities in Connecticut, Massachusetts and New Hampshire serving nearly 3.5 million electric and gas customers.

Under the terms of the agreement, NSTAR shareholders will receive 1.312 NU common shares for each NSTAR common share that they own. Following completion of the merger, it is anticipated that NU shareholders will own approximately 56 percent and former NSTAR shareholders will own approximately 44 percent of the combined company.  On March 4, 2011, shareholders of each company approved the merger and adopted the merger agreement.  Completion of the merger is subject to various customary conditions, including receipt of required regulatory approvals.

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Regulatory Approvals on Pending Merger with Northeast Utilities

      Federal

On January 4, 2011, NSTAR and NU received approval from the Federal Communications Commission, and on February 10, 2011, the applicable Hart-Scott-Rodino waiting period expired.  On January 7, 2011, NSTAR and NU filed an application with the Federal Energy Regulatory Commission (FERC), requesting approval of the merger by May 10, 2011.  A filing was made with the Nuclear Regulatory Commission on December 9, 2010.  

      Massachusetts

On November 24, 2010, NSTAR and NU filed a joint petition requesting the DPU’s approval of their proposed merger.  On March 10, 2011, the DPU issued an order that modified the standard of review to be applied in the review of mergers involving Massachusetts utilities from a “no net harm” standard to a “net benefits” standard, meaning that the companies must demonstrate that the pending transaction provides benefits that outweigh the costs.  Applicable state law provides that mergers of Massachusetts utilities and their respective holding companies must be “consistent with the public interest.”  The order states that the DPU has flexibility in applying the factors applicable to the standard of review.  NSTAR and NU filed supplemental testimony with the DPU on April 8, 2011 indicating the merger could provide net savings for the combined companies of an estimated $780 million in the first ten years following the closing of the merger and provide other customer benefits.  Evidentiary hearings are scheduled to begin on July 6, 2011.  NSTAR and NU expect a ruling from the DPU in the second half of 2011.

     Connecticut

In November 2010, the Connecticut Department of Public Utility Control (DPUC) issued a draft decision finding that it lacks jurisdiction to consider the NSTAR Merger with NU.  In December 2010, the Connecticut Office of Consumer Counsel (OCC) petitioned the DPUC to reconsider its draft decision.  On January 26, 2011, the DPUC issued an Administrative Order stating that it would hold a hearing on the question of jurisdiction.  In February 2011, oral arguments were held and in March 2011, a public information session on the merger was held.  No date has been established for a final decision.  In addition, legislation proposing to give the DPUC jurisdiction over the merger received a joint favorable recommendation from the Connecticut Joint Legislative Energy and Technology Committee in March 2011.

     New Hampshire

On April 5, 2011, the New Hampshire Public Utilities Commission (NHPUC) issued an order finding that it does not have statutory authority to approve or reject the merger.

     Maine

NSTAR and NU are also asking Maine regulators to waive jurisdiction over the merger.  Although neither NSTAR nor NU subsidiaries serve any customers in Maine, Public Service Company of New Hampshire, an NU subsidiary, owns transmission assets in the state that are subject to the jurisdiction of the Maine Public Utilities Commission.  On April 15, 2011, a hearing examiner issued a report rejecting the waiver request, but approving the merger contingent upon approval by the FERC.  

Earnings

NSTAR Electric's earnings are impacted by its customers’ requirements for energy in the form of unit sales of electricity, which have an effect on the level of retail distribution and transmission revenues recognized.  In accordance with the regulatory rate structure in which NSTAR Electric operates, its recovery of energy costs are fully reconciled with the level of energy revenues currently recorded and, therefore, do not have an impact on earnings.

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Net income for the three-month period ended March 31, 2011 was $42.9 million, as compared to $42.7 million for the same period in 2010, as further explained below.

Critical Accounting Policies and Estimates

For a complete discussion of critical accounting policies, refer to "Critical Accounting Policies and Estimates" in Item 7 of NSTAR Electric's 2010 Form 10-K.  There have been no substantive changes to those policies and estimates.

Rate and Regulatory Proceedings

Rate Structure

a.  Rate Settlement Agreement

NSTAR Electric is operating under a DPU-approved Rate Settlement Agreement (Rate Settlement Agreement) that expires December 31, 2012.  From 2007 through 2012, the Rate Settlement Agreement establishes for NSTAR Electric, among other things, annual inflation-adjusted distribution rates that are generally offset by an equal and corresponding reduction in transition rates.  The rates as of January 1 were as follows:

b.  Regulated Electric Distribution Rates

Retail electric delivery rates are established by the DPU and are comprised of:

c.  Regulatory Matters

DPU Safety and Reliability Programs (CPSL)

As part of the Rate Settlement Agreement, NSTAR Electric is allowed to recover incremental costs related to the double pole inspection, replacement/restoration and transfer program and the underground electric safety program, which includes stray-voltage remediation and manhole inspections, repairs, and upgrades.  Recovery of these Capital Program Scheduling List (CPSL) billed costs is subject to DPU review and approval.  From 2006 through 2010, NSTAR Electric incurred and billed cumulative incremental revenue requirements of approximately $67 million.  During 2011, approximately $3.5 million has been incurred through March 31.  These amounts include incremental operations and maintenance and revenue requirements on capital investments.  

On May 28, 2010, the DPU issued an order on NSTAR Electric’s 2006 CPSL costs recovery filing.  The expected recovery amount did not vary materially from the revenue previously recognized.  On October 8, 2010, NSTAR Electric submitted a Compliance Filing with the DPU reconciling the recoverable CPSL Program revenue requirement for each year 2006 through 2009 with the revenues already collected to determine the proposed adjustment effective on January 1, 2011.  The DPU allowed the proposed rates to go into effect on that date, subject to reconciliation of program costs.  NSTAR Electric cannot predict the timing of subsequent DPU orders related to this filing.  Should an adverse DPU decision be issued, it could have a material adverse impact on NSTAR Electric’s result of operations, financial position, and cash flows.

Basic Service Bad Debt Adder

On July 1, 2005, in response to a generic DPU order that required electric utilities in Massachusetts to recover the energy-related portion of bad debt costs in their Basic Service rates, NSTAR Electric increased its Basic Service rates and reduced its distribution rates for those bad debt costs.  In furtherance of this generic DPU order, NSTAR Electric included a bad debt cost recovery mechanism as a component of its Rate Settlement Agreement.  This recovery mechanism (bad debt adder) allows NSTAR Electric to recover its Basic Service bad debt costs on a fully reconciling basis.  These rates were implemented, effective January 1, 2006, as part of NSTAR Electric’s Rate Settlement Agreement.

On February 7, 2007, NSTAR Electric filed its 2006 Basic Service reconciliation with the DPU proposing an adjustment related to the increase of its Basic Service bad debt charge-offs.  This proposed rate adjustment was anticipated to be implemented effective July 1, 2007.  On June 28, 2007, the DPU issued an order approving the implementation of a revised Basic Service rate.  However, the DPU instructed NSTAR Electric to reduce distribution rates by the increase in its Basic Service bad debt charge-offs.  Such action would result in a further reduction to distribution rates from the adjustment NSTAR Electric made when it implemented the Settlement Agreement.  This adjustment to NSTAR Electric’s distribution rates would eliminate the fully reconciling nature of the Basic Service bad debt adder.

NSTAR Electric has not implemented the directives of the June 28, 2007 DPU order.  Implementation of this order would require NSTAR Electric to write-off a previously recorded regulatory asset related to its Basic Service bad debt costs.  NSTAR Electric filed a Motion for Reconsideration of the DPU’s order on July 18, 2007.  On May 28, 2010, the DPU issued an order and reaffirmed that NSTAR Electric should

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reduce its distribution rates by the increase in its Basic Service bad debt charge-offs.  On June 18, 2010, NSTAR Electric filed an appeal of the DPU’s order with the Massachusetts Supreme Judicial Court (SJC).  A decision by the SJC is expected in late 2011.  As of March 31, 2011, the potential pre-tax impact to earnings of eliminating the bad debt adder would be approximately $23 million.  NSTAR Electric cannot predict the timing of this appeals process.  NSTAR Electric continues to believe that its position is appropriate and that it is probable upon appeal that it will ultimately prevail.

Other

In the fourth quarter of each year, NSTAR Electric files proposed distribution rate adjustments for effect on the following January 1.  These rate adjustments include a SIP rate factor and several other fully reconciling cost recovery items.  Consistent with previous filings, the 2010 filings include a combination of actual and forecasted data for 2010 that NSTAR Electric will update during 2011 with year-end data to allow a final investigation and reconciliation.  There are several case years that remain outstanding at the DPU.  These cases are pending decisions at the DPU and NSTAR Electric cannot predict the timing or the ultimate outcome of these filings.

FERC Transmission ROE

NSTAR Electric earns an 11.14% ROE on local transmission facility investments.  The ROE on NSTAR Electric’s regional transmission facilities is 11.64%.  Additional incentive adders are available and are decided on a case-by-case basis according to FERC’s national transmission incentive rules.  The FERC may grant a variety of financial incentives, including ROE basis point incentive adders for qualified investments made in new regional transmission facilities.  This 100 basis point adder, when combined with the FERC’s approved ROEs described above, results in a 12.64% ROE for qualified regional investments.  The incentive is intended to promote and accelerate investment in transmission projects that can significantly reduce congestion costs and enhance reliability in the region.

Other

a. Energy Efficiency Plans

NSTAR Electric administers demand-side management energy efficiency programs.  The Massachusetts Green Communities Act (GCA) directs electric distribution companies to develop three-year energy efficiency plans.  The first three-year plan covering the period 2010 through 2012 was approved by the DPU and is expected to lead to a significant expansion of energy efficiency activity in Massachusetts.  Like the historical programs, the new three-year plan includes financial incentives based on energy efficiency program performance. In addition, the DPU has stated that it will permit distribution companies that do not as yet have rate decoupling mechanisms in place to implement lost base revenue rate adjustment mechanisms that will partially offset reduced distribution rate revenues as a result of successful energy efficiency programs.

During the first quarter of 2011, NSTAR Electric incurred Energy Efficiency expenses of $40.1 million, inclusive of program administrator incentives.  NSTAR Electric has filed its 2011 Energy Efficiency Plan and anticipates that the program will amount to about $184.3 million in spending, inclusive of program administrator incentives.

Results of Operations

The following section of MD&A compares the results of operations for each of the three-month periods ended March 31, 2011 and 2010 and should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements included elsewhere in this report.

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Three Months Ended March 31, 2011 compared to Three Months Ended March 31, 2010

Executive Summary of Quarterly Results

Net income was $42.9 million for the quarter ended March 31, 2011 compared to $42.7 million for the same period in 2010.  Major factors on an after-tax basis during the quarter include:

These increases in earnings factors were partially offset by:

Significant cash flow events during the quarter include the following:

Energy sales

The following is a summary of retail electric energy sales for the periods indicated:

NSTAR Electric’s energy sales in the three months ended March 31, 2011 increased 3.1% compared to 2010 primarily due to favorable weather conditions resulting from a colder winter during 2011 as compared to 2010, and some positive impact of the economic recovery.  Heating degree-days in the Boston area for the three months ended March 31, 2011 were up 11% from the same period in 2010.  

Weather and, to a lesser extent, fluctuations in fuel costs, conservation measures, and economic conditions affect sales to NSTAR Electric’s residential and small commercial customers.  Economic conditions, fluctuations in fuel costs, and conservation measures affect NSTAR Electric’s large commercial and industrial customers.  In terms of customer sector characteristics, industrial sales are less sensitive to weather than residential and commercial sales, which are influenced by temperature variations.  Refer to the “Operating Revenues” section below for a more detailed discussion.

Weather conditions

NSTAR Electric forecasts its electric sales based on normal weather conditions.  Actual results may vary from those projected due to actual weather conditions, energy conservation, and other factors.  Refer to the “Cautionary Statement Regarding Forward-Looking Information” section preceding Part 1 “Financial Information” of this Form 10-Q.

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The demand for electricity is affected by weather.  Weather impacts electric sales primarily during the summer in NSTAR Electric’s service area.  Customer heating or cooling usage may not directly correlate with historical levels or with the level of degree-days that occur (as further discussed below), particularly when weather patterns experienced are consistently colder or warmer.  Also, NSTAR Electric’s business is sensitive to variations in daily weather, is highly influenced by New England’s seasonal weather variations, and is susceptible to damage from major storms and other natural events and disasters that could adversely affect the Company’s ability to provide energy.  

Degree-days measure changes in daily mean temperature levels.  A degree-day is a unit measuring how many degrees the outdoor daily mean temperature falls below (in the case of heating) or rises above (in the case of cooling) a base of 65 degrees.  As shown in the table below, weather conditions during the three-month period ended March 31, 2011 measured by heating degree-days were 11% colder for 2011 as compared to 2010.  Similarly, weather conditions were colder than the 30-year average by 1.5% during the first quarter of 2011.  Refer to the “Operating Revenues” section below for a more detailed discussion.

Operating revenues

Operating revenues for the first quarter of 2011 increased $15.4 million, or 2.6%, from the same period in 2010 as follows:

NSTAR Electric's largest earnings sources are the revenues derived from distribution and transmission rates approved by the DPU and the FERC.  Electric retail distribution revenues primarily represent charges to customers for recovery of the Company's capital investment, including a return component, and operation and maintenance costs related to its electric distribution infrastructure.  The transmission revenue component represents charges to customers for the recovery of similar costs to move the electricity over high voltage lines from the generator to the Company's distribution substations.  

The increase of $17.2 million, or 6.8%, in retail distribution and transmission revenues primarily reflects:

Energy, transition, and other revenues primarily represent charges to customers for the recovery of costs incurred by the Company in order to acquire the energy supply on behalf of its customers and a transition charge for recovery of the Company's prior investments in generating plants and the costs related to long-term power contracts.  The energy revenues relate to customers being provided energy supply under

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Basic Service.  These revenues are fully reconciled to the costs incurred and have no impact on NSTAR Electric's consolidated net income.  Energy, transition, and other revenues also reflect revenues related to the Company's ability to effectively reduce stranded costs (incentive entitlements), rental revenue from electric property, and annual cost reconciliation true-up adjustments.  Comparable energy, transition, and other revenues is attributable to higher energy efficiency revenues due to the expansion of these programs, offset by lower Basic Service rates in effect due to lower energy costs.  Uncollected transition costs as a result of the reductions in transition rates are deferred and collected through future rates with a carrying charge.

Operating expenses

Purchased power and transmission expense was $279.3 million in the first quarter of 2011 compared to $283.9 million in the same period of 2010, a decrease of $4.6 million, or 1.6%.  The decrease in expense reflects lower Basic Service and other energy costs of $11.3 million.  These decreases were partially offset by higher transmission costs of $6.7 million due to an increase in regional network support costs.  NSTAR Electric adjusts its rates to collect the costs related to energy supply from customers on a fully reconciling basis.  Due to this rate adjustment mechanism, changes in the amount of energy supply expense have no impact on consolidated net income.  

Operations and maintenance expense was $92.8 million in the first quarter of 2011 compared to $85.1 million in the same period of 2010, an increase of $7.7 million, or 9%.  The increase in expense reflects higher pension and PBOP related PAM amortization costs ($2.5 million).  Fluctuations in PAM amortization do not have an earnings impact as these costs are fully recovered from customers.  Also contributing to the higher expense were storm-related expenses ($0.8 million), timing of maintenance ($2.1 million) and timing of certain labor-related costs ($2.7 million).

Depreciation and amortization expense was $68.5 million in the first quarter of 2011 compared to $80.7 million in the same period of 2010, a decrease of $12.2 million, or 15.1%.  The decrease primarily reflects lower amortization costs related to the pay-down of securitized debt, offset by higher depreciable distribution and transmission plant-in-service.

Energy efficiency and renewable energy programs expense was $40.1 million in the first quarter of 2011 compared to $17.7 million in the same period of 2010, an increase of $22.4 million, or 126.6%.  These costs are in accordance with the new three-year plan program guidelines established by the DPU and are collected from customers on a fully reconciling basis plus a performance incentive.  NSTAR Electric anticipates a further increase in Energy Efficiency spending during 2011 and in future years driven by requirements of the GCA.  Those spending increases are funded partially through proceeds from the Regional Greenhouse Gas Initiative and through NSTAR Electric’s participation in the Forward Capacity Market.

Property and other taxes expense was $29.0 million in the first quarter of 2011 compared to $26.2 million in the same period of 2010, an increase of $2.8 million, or 10.7%, reflecting higher overall property investments and higher tax rates.  

Interest charges (income):

Long-term debt and transition property securitization certificate interest charges were $25.0 million in the first quarter of 2011 compared to $25.4 million in the same period of 2010 a decrease of $0.4 million, or 1.6%.  The decrease in interest charges reflects scheduled principal pay downs of transition property securitization debt.

Interest income and other, net were $7.4 million of net interest income in the first quarter of 2011 compared to $6.3 million of net interest income in the same period of 2010, an increase of $1.1 million, or 17.5%, due to increased interest income of $1.2 million related to higher regulatory deferrals.

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Other income (deductions):

Other income was approximately $1.0 million in the first quarter of 2011 compared to $0.8 million in the same period of 2010, an increase of $0.2 million, or 25%.  The increase relates primarily to higher cash surrender values of insurance policies and higher equity investment earnings.

Other deductions were $0.6 million in the first quarter 2011 compared to $0.4 million in the same period 2010, an increase of $0.2 million, or 50%.

Income tax expense:

Income tax expense was $28.1 million in the first quarter of 2011 compared to $27.6 million in the same period of 2010, an increase of $0.5 million, or 1.8% primarily reflecting higher pre-tax operating income.  

Item 4. Controls and Procedures

NSTAR Electric's disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

As of the end of the period covered by this Quarterly Report on Form 10-Q, NSTAR Electric carried out an evaluation, under the supervision and with the participation of NSTAR Electric's management, including NSTAR Electric's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of NSTAR Electric's disclosure controls and procedures pursuant to Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e).  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that NSTAR Electric's disclosure controls and procedures were effective (1) to timely alert them to material information relating to NSTAR Electric's information required to be disclosed by NSTAR Electric in the reports that it files or submits under the Securities Exchange Act of 1934 and (2) to ensure that appropriate information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

There have been no changes in NSTAR Electric’s internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Securities Exchange Act of 1934) during NSTAR Electric's most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, NSTAR Electric's internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

In the normal course of its business, NSTAR Electric and its subsidiaries are involved in certain legal matters, including civil litigation. Management is unable to fully determine a range of reasonably possible court-ordered damages, settlement amounts, and related litigation costs ("legal liabilities") that would be in excess of amounts accrued and amounts covered by insurance. Based on the information currently available, NSTAR Electric does not believe that it is probable that any such legal liability will have a material impact on its consolidated financial position. However, it is reasonably possible that additional legal liabilities that may result from changes in circumstances could have a material impact on its results of operations, financial condition, or cash flows.

Item 1A. Risk Factors

Investors or prospective investors should carefully consider the risk factors that were previously disclosed in NSTAR Electric's Annual Report on Form 10-K for the year ended December 31, 2010.

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Item 5.  Other Information

The following is furnished for informational purposes.

Ratio of earnings to fixed charges and ratio of earnings to fixed charges and preferred stock dividend requirements:

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Item 6.  Exhibits

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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