The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related combined notes included in this Quarterly Report on Form 10-Q and the Northeast Utilities and subsidiaries combined 2008 Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC) (2008 Form 10-K). References in this Form 10-Q to "NU," "we," "us" and "our" refer to Northeast Utilities and its consolidated subsidiaries. All per share amounts are reported on a fully diluted basis.

The only common equity securities that are publicly traded are common shares of NU. The earnings and earnings per share (EPS) of each segment discussed below do not represent a direct legal interest in the assets and liabilities allocated to such segment but rather represent a direct interest in our assets and liabilities as a whole. EPS by segment is a measure not recognized under accounting principles generally accepted in the United States of America (GAAP) that is calculated by dividing the net income or loss attributable to noncontrolling interests of each segment by the average fully diluted NU common shares outstanding for the period. We use this measure to provide segmented earnings results and guidance and believe that this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of our business segments. This non-GAAP measure should not be considered as an alternative to our consolidated fully diluted EPS determined in accordance with GAAP as an indicator of operating performance.

The discussion below also includes non-GAAP measures referencing our 2008 earnings and EPS excluding a significant charge resulting from the settlement of litigation. We use these non-GAAP measures to more fully explain and compare the 2009 and 2008 results without including the impact of this settlement. Due to the nature and significance of the settlement charge, management believes that this non-GAAP presentation is more representative of our performance and provides additional and useful information to investors in analyzing historical and future performance. These measures should not be considered as alternatives to reported net income attributable to controlling interests or EPS determined in accordance with GAAP as indicators of operating performance.

Reconciliations of the above non-GAAP measures to the most directly comparable GAAP measures of consolidated fully diluted EPS and net income attributable to controlling interests are included under "Financial Condition and Business Analysis-Overview-Consolidated" and "Financial Condition and Business Analysis-Future Outlook" in this Management's Discussion and Analysis.

Financial Condition and Business Analysis

Current Economic Conditions:

The weak economic conditions in the Northeast could have a continued negative effect on our customers, which could result in greater risk of default or nonpayment. The weak economic conditions may also limit our ability to obtain distribution rate relief or to receive approvals on major transmission projects, the cost of which will ultimately increase customer rates. We have included our best estimate of the impacts of these factors in the assumptions that were used to develop our earnings guidance; however, we are unable to predict the ultimate impact of these conditions on our future results of operations.

Despite the weak economic conditions and remaining uncertainty with respect to the capital and credit markets, we expect to make significant investments in our capital projects in 2009 through 2013. We believe that even under present circumstances, our current credit ratings and business profile will allow us to have adequate access to the capital markets as needed. This belief is supported by our recent success accessing the capital markets in three separate transactions: NU parent's common share issuance resulting in $370.8 million of net proceeds in March 2009, The Connecticut Light and Power Company's (CL&P) issuance of $250 million of 10-year bonds in February 2009 at 5.5 percent, and the remarketing of $62 million of CL&P's tax-exempt pollution control revenue bonds (PCRBs) in April 2009 at 5.25 percent.

At this point in time, while the impacts of the uncertainty in the capital and credit markets and the ongoing economic downturn cannot be predicted, we believe that we currently have sufficient operating flexibility and access to funding sources to maintain adequate liquidity.

Executive Summary

The following items in this executive summary are explained in more detail in this Quarterly Report:

Results, Strategy and Outlook:

·

We earned $97.7 million, or $0.60 per share, in the first quarter of 2009, compared with $58.4 million, or $0.38 per share, in the first quarter of 2008.
Excluding an after-tax charge of $29.8 million, or $0.19 per share, associated with the settlement of litigation, our first quarter 2008 earnings were $88.2 million, or $0.57 per share.

·

Our regulated companies, which consist of CL&P, Public Service Company of New Hampshire (PSNH), Western Massachusetts Electric Company (WMECO), and Yankee Gas Services Company (Yankee Gas), earned $94.6 million, or $0.58 per share, in the first quarter of 2009, compared with $86.3 million, or $0.56 per share, in the first quarter of 2008. The first quarter 2009 results included earnings of $59.2 million in the distribution segment (which includes the generation business of PSNH and gas distribution segment of Yankee Gas), and $35.4 million in the transmission segment. In the first quarter of 2008, our distribution segment earned $53.8 million, and our transmission segment earned $32.5 million.

·

Our competitive businesses held by NU Enterprises, Inc. (NU Enterprises) earned $5.8 million, or $0.04 per share, in the first quarter of 2009, compared with $1.9 million, or $0.01 per share, in the first quarter of 2008. First quarter 2008 results include a net after-tax reduction of earnings of $3 million associated with the implementation of Statement of Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements."

·

NU parent and other companies recorded net expenses of $2.7 million, or $0.02 per share, in the first quarter of 2009, compared with $29.8 million, or $0.19 per share, in the first quarter of 2008. First quarter 2008 results include the after-tax charge of $29.8 million from the settlement of litigation.

·

We continue to project consolidated 2009 earnings of between $1.80 per share and $2.00 per share, but we estimate we will earn toward the lower end of that range. We had expected to sell new common shares in mid-2009, but advanced the timing of the issuance to March 2009 and increased the number of shares offered due to favorable market conditions. We also maintain our previously announced 2009 EPS guidance for each of our business segments.

Legal, Regulatory and Other Items:

·

On April 17, 2009, PSNH filed an application with the New Hampshire Public Utilities Commission (NHPUC) to raise distribution rates on a temporary basis by approximately $36.4 million annually, effective July 1, 2009. PSNH expects to file an application for a permanent distribution rate increase within a few months of the temporary rate filing, with a decision expected in mid-2010. Any differences between temporary and permanent rates will be retroactive to the point that temporary rates become effective.

·

On March 24, 2009, the New Hampshire House of Representatives rejected House Bill 496, which would have placed a $250 million cap on the amount of PSNH's capital investment in its Merrimack Clean Air Project that could be reflected in customer rates. Also on April 8, 2009, the New Hampshire Senate rejected Senate Bill 152, which would have required the NHPUC to undertake a 90-day cost-benefit analysis of the Clean Air Project. The project is expected to cost approximately $457 million and is required by law to be operable by July 2013.

·

On February 12, 2009, WMECO filed an application with the Massachusetts Department of Public Utilities (DPU) to implement an integrated, large scale solar energy program in its service territory. WMECO proposed to install up to 6 megawatts (MW) of solar generation facilities at eight sites that include a combination of educational, industrial, landfill and utility sites at an estimated cost of $42 million. This project could be completed as early as 2010. WMECO also proposed the installation of another 9 MW of solar capacity by the end of 2012, subject to regulatory review.

·

On April 1, 2009, WMECO filed a separate application with the DPU to develop a "smart grid" pilot for 600 to 800 lower income customers in the Springfield, Massachusetts area. In March 2009, CL&P had enrolled 3,000 customers for a separate "smart grid" pilot that will run from June 1, 2009 through August 31, 2009.

·

On March 31, 2009, CL&P and WMECO submitted a grant application to the U.S. Department of Energy (DOE) requesting matching funds for them to build an initial network of electric vehicle (EV) charging stations in their service areas at a total cost to them of $0.6 million. The proposal for this pilot program calls for installation of 575 EV charging stations at targeted home-based, workplace and public sites, as well as the required metering capability. This pilot is expected to help the region plan for a larger charging infrastructure for the mass-market distribution of EVs in coming years.

Liquidity:

·

We closed on the sale of 18,975,000 common shares on March 20, 2009, resulting in $370.8 million of net proceeds to the company after underwriting commissions of $12.5 million. The proceeds will be used to fund our regulated capital investment program.

·

CL&P closed on the sale of $250 million of first mortgage bonds on February 13, 2009. The bonds carry a coupon of 5.5 percent and will mature on February 1, 2019.

·

CL&P completed the remarketing of $62 million of PCRBs on April 2, 2009. The bonds carry a coupon of 5.25 percent and are subject to a mandatory tender for purchase on April 1, 2010.

·

Our cash capital expenditures totaled $208.9 million in the first quarter of 2009, compared with $288.1 million in the first quarter of 2008. The decrease in our cash capital expenditures was primarily the result of lower transmission segment capital expenditures, particularly at CL&P due to the completion in 2008 of three major transmission projects in southwest Connecticut. We project cash capital expenditures of approximately $920 million in 2009.

·

After rate reduction bond (RRB) payments included in financing activities, we had consolidated cash flows provided by operations in the first quarter of 2009 of $77.5 million, which represented an increase of $40.9 million from the first quarter of 2008. The improved cash flows were primarily due to the absence in the first quarter of 2009 of the litigation settlement payment of $49.5 million in March 2008. Refer to "Liquidity-Consolidated" in this Management's Discussion and Analysis for further discussion on first quarter 2009 operating cash flows. We continue to project consolidated operating cash flows of approximately $500 million in 2009, after RRB payments.

·

Primarily as a result of NU parent's common share offering and CL&P's first mortgage bond issuance noted above, our cash and cash equivalents totaled $416.8 million at March 31, 2009, compared with $89.8 million at December 31, 2008. At March 31, 2009, we also had $247 million of borrowing availability on our revolving credit lines, excluding the commitment of Lehman Brothers Commercial Bank (LBCB) (refer to "Liquidity - Impact of Financial Market Conditions" for further discussion).

Overview

Consolidated: We earned $97.7 million, or $0.60 per share, in the first quarter of 2009, compared with $58.4 million, or $0.38 per share, in the first quarter of 2008. Excluding an after-tax charge of $29.8 million, or $0.19 per share, resulting from the settlement of litigation, our earnings in the first quarter of 2008 were $88.2 million, or $0.57 per share. A summary of our earnings by segment, which also reconciles the non-GAAP measures of consolidated non-GAAP earnings and EPS, as well as EPS by segment, to the most directly comparable GAAP measures of consolidated net income attributable to controlling interests and fully diluted EPS, for the first quarters of 2009 and 2008, is as follows:

                                                For the Three Months Ended March 31,
                                                    2009                      2008
(Millions of Dollars, except per share     Amount
amounts)                                                Per Share     Amount     Per Share
Net income attributable to controlling    $
interests (GAAP)                              97.7     $     0.60    $  58.4    $     0.38

Regulated companies                       $   94.6     $     0.58    $  86.3    $     0.56
Competitive businesses                         5.8           0.04        1.9          0.01
NU parent and other companies                 (2.7)         (0.02)         -             -
Non-GAAP earnings                             97.7           0.60       88.2          0.57
Litigation charge (after-tax)                    -              -      (29.8)        (0.19)
Net income attributable to controlling    $
interests (GAAP)                              97.7     $     0.60    $  58.4    $     0.38

Regulated Companies: Our regulated companies segment their earnings between their electric transmission segments and their electric and gas distribution segments, with PSNH generation included in the electric distribution segments.
A summary of regulated company earnings by segment for the first quarters of 2009 and 2008 is as follows:

                                     For the Three Months Ended March 31,
(Millions of Dollars)                       2009                   2008
CL&P Transmission                  $            30.1      $            25.8
PSNH Transmission                                4.0                    5.2
WMECO Transmission                               1.3                    1.5
   Total Transmission                           35.4                   32.5
CL&P Distribution                               21.6                   18.9
PSNH Distribution                               13.5                   11.5
WMECO Distribution                               4.8                    4.8
Yankee Gas                                      19.3                   18.6
   Total Distribution                           59.2                   53.8
Net Income - Regulated Companies   $            94.6      $            86.3

The higher first quarter 2009 transmission segment earnings reflect a higher level of investment in this segment as we continued to build out our transmission infrastructure to meet our customers' and the region's reliability needs. The first quarter 2009 transmission segment results primarily reflect the effect of CL&P's investment of approximately $1.6 billion since the beginning of 2005 in the southwest Connecticut transmission projects that were ultimately completed in late 2008. The first quarter 2008 transmission segment results included earnings of approximately $3.5 million associated with an order on rehearing issued by the Federal Energy Regulatory Commission (FERC) concerning the return on equity (ROE) allowed to owners of New England electric transmission facilities, including CL&P, PSNH and WMECO. Approximately $2.9 million of the $3.5 million related to the February 1, 2005 through December 31, 2007 time period.

CL&P's first quarter 2009 distribution segment earnings were $2.7 million higher than the same period in 2008 primarily due to higher revenues resulting from distribution rate increases effective February 1, 2008 and February 1, 2009 and lower interest expense as a result of lower state income taxes stemming from the closure of an audit, partially offset by higher operating costs including employee benefit costs and depreciation expense. For the 12 months ended March 31, 2009, CL&P's distribution segment Regulatory ROE was 7.1 percent and for 2009, we expect it to be approximately 7 percent.

PSNH's first quarter 2009 distribution segment earnings were $2 million higher than the same period in 2008 primarily due to higher generation-related earnings and higher distribution revenues, partially offset by higher operating costs including employee benefit costs, depreciation expense, and property taxes. For the 12 months ended March 31, 2009, PSNH's distribution segment Regulatory ROE was 8.4 percent and for 2009, we expect it to be approximately 8 percent.

WMECO's first quarter 2009 distribution segment earnings were unchanged from the same period in 2008. Revenues were slightly higher in the first quarter of 2009 but were offset by higher carrying costs owed to customers on regulatory deferrals. For the 12 months ended March 31, 2009, WMECO's distribution segment Regulatory ROE was 6.9 percent and for 2009, we expect it to be approximately 8 percent.

Yankee Gas's first quarter 2009 earnings were $0.7 million higher than the same period in 2008 due to a 12.8 percent increase in firm natural gas sales partially offset by higher operating costs including repairs and maintenance, employee benefit costs, interest expense, and depreciation expense. For the 12 months ended March 31, 2009, Yankee Gas's Regulatory ROE was 8 percent and for 2009, we expect it to be approximately 9 percent.

For the distribution segment of our regulated companies, a summary of changes in CL&P, PSNH and WMECO retail electric kilowatt-hour (KWH) sales and Yankee Gas firm natural gas sales for the first quarter of 2009 as compared to the same period in 2008 on an actual and weather normalized basis (using a 30-year average) is as follows:

                                                             Electric                                                     Firm Natural Gas
                       CL&P                      PSNH                      WMECO                      Total                  Yankee Gas
                            Weather                   Weather                    Weather                   Weather
                           Normalized                Normalized                Normalized                 Normalized                 Weather
              Percentage   Percentage   Percentage   Percentage   Percentage   Percentage    Percentage   Percentage                Normalized
              Increase/    Increase/    Increase/    Increase/    Increase/    (Decrease)/   Increase/    Increase/    Percentage   Percentage
              (Decrease)   (Decrease)   (Decrease)   (Decrease)   (Decrease)    Increase     (Decrease)   (Decrease)    Increase     Increase
Residential        4.7 %        1.7 %        3.1 %        1.0 %        1.9 %        (0.7)%        4.1 %        1.3 %        11.2%         4.3%
Commercial        (2.3)%       (3.0)%       (1.5)%       (2.1)%       (3.1)%        (3.5)%       (2.2)%       (2.9)%        15.0%         8.5%
Industrial       (24.1)%      (24.1)%       (8.0)%       (8.0)%      (16.0)%       (16.0)%      (18.3)%      (18.3)%        12.1%         9.9%
Other              5.9 %        5.9 %       (5.5)%       (5.5)%       40.5 %         40.5%        7.6 %        7.6 %          -          -
Total             (1.5)%       (3.2)%      (0.7)%        (1.8)%       (3.2)%        (4.4)%       (1.5)%       (3.0)%        12.8%        7.2%

A summary of our retail electric sales in gigawatt hours for CL&P, PSNH and WMECO and firm natural gas sales in million cubic feet for Yankee Gas for the first quarter of 2009 and 2008 is as follows:

                               For the Three Months Ended March 31,
                            Electric                         Firm Natural Gas
                                    Percentage                            Percentage
               2009     2008    Increase/(Decrease)    2009      2008      Increase
Residential   4,148    3,985                  4.1 %    6,461     5,809         11.2%
Commercial    3,633    3,716                 (2.2)%    6,267     5,450         15.0%
Industrial    1,009    1,234                (18.3)%    4,306     3,842         12.1%
Other            98       91                  7.6 %        -         -           -
Total         8,888    9,026                 (1.5)%   17,034    15,101         12.8%

First quarter 2009 actual and weather normalized retail electric sales for all three electric companies were lower than the same period in 2008, but residential sales were higher, which contributed to higher distribution revenues in the first quarter of 2009. As compared to other customer classes, we recover a greater portion of residential revenues through volumetric charges. The higher residential sales in the first quarter of 2009 translated proportionately into higher distribution revenues. In contrast to residential rates, a much smaller portion of commercial and industrial revenues are recovered through volumetric charges. In fact, certain large business rates are structured so that we recover 100 percent of the distribution revenues through non-volumetric charges. In this regard, rate design has significantly mitigated the impact of the declining commercial and industrial sales on distribution revenues and earnings.

The decline in industrial sales for the first quarter of 2009 reflects the fact that many industrial customers have been severely impacted by the economic conditions of our region and the nation. Although some industrial facilities have closed, we believe the reduction in industrial sales is primarily driven by a reduced number of shifts and days of operations. In this regard, a portion of these reduced industrial sales may be regained when the economy begins to recover. Further, commercial and industrial sales in the first quarter of 2009 were negatively impacted by additional installation of distributed generation, utilization of conservation and load management programs, and other measures employed by customers to reduce their usage of electricity.

Firm natural gas sales on an actual and weather normalized basis were higher in the first quarter of 2009 than the same period in 2008. First quarter 2009 commercial and industrial sectors have benefitted substantially from the addition of new large gas-fired distributed generation in Yankee Gas's service territory during the last twelve months. The rate of growth in gas sales is expected to moderate for the balance of 2009 as the weak economic conditions are expected to continue until later in 2009 or early 2010, and as the large distributed generation load additions are reflected in future year-over-year comparisons. Yankee Gas recovers approximately 40 percent of its total distribution revenues through non-usage charges, and thus changes in sales result in less of an impact in revenues.

Our uncollectibles expense is influenced by the economic conditions of our region; however, a portion of the uncollectibles expense for each of the electric distribution companies is allocated to the respective company's energy supply rate and recovered as a tracked expense. Additionally, for CL&P and Yankee Gas, write-offs attributable to hardship customers are tracked and fully recovered. For the first quarter of 2009, our total uncollectibles expense was approximately $3.1 million higher than the same period in 2008, but consistent with our expectations.

Competitive Businesses: NU Enterprises, which continues to manage to completion Select Energy Inc.'s (Select Energy) remaining wholesale marketing contracts and to manage its energy services activities, earned $5.8 million in the first quarter of 2009, compared with $1.9 million in the first quarter of 2008. First quarter 2008 results included a net after-tax reduction of earnings of $3 million associated with the implementation of SFAS No. 157. Competitive business earnings for the first quarter of 2009 and 2008 included positive mark-to-market after-tax results of $3.2 million and $0.5 million, respectively, associated with Select Energy's wholesale marketing contracts.

NU Parent and Other Companies: NU parent and other companies recorded net expenses of $2.7 million in the first quarter of 2009, compared with net expenses of $29.8 million in the first quarter of 2008. The net expenses in the first quarter of 2008 resulted from the payment by NU parent of $49.5 million in March 2008 as part of a comprehensive settlement of litigation initiated in 2001 over a proposed but unconsummated merger. Excluding the $29.8 million after-tax impact of this settlement in 2008, the increase in net expenses for 2009 was primarily due to higher interest expense from the replacement of $150 million of 3.3 percent senior notes that matured on June 1, 2008 with $250 million of 5.65 percent senior notes.

Future Outlook

EPS Guidance: We project consolidated 2009 results will be at the lower end of the earnings range of between $1.80 per share and $2.00 per share. This projection includes the impact of the issuance of 18,975,000 common shares on March 20, 2009, which was originally forecast for mid-2009 with a lower number of shares.

A summary of our projected 2009 EPS by segment, which also reconciles consolidated fully diluted EPS to the non-GAAP measures of EPS by segment, is as follows:

                                  2009 EPS Range
(Approximate amounts)              Low        High
Fully Diluted EPS (GAAP)        $  1.80    $  2.00

Regulated companies:
 Distribution segment           $  1.00    $  1.10
 Transmission segment              0.85       0.90
Total regulated companies          1.85       2.00
Competitive businesses             0.00       0.05
NU parent and other companies     (0.05)     (0.05)
Fully Diluted EPS (GAAP)        $  1.80    $  2.00

Long-Term Growth Rate: We project that we will achieve an average compounded annual EPS growth rate of between 8 percent and 11 percent over 2007 EPS of $1.59 through 2013. We continue to estimate we will likely be at the lower end of this range. This EPS growth rate assumes achieved Regulatory ROEs of approximately 12 percent for transmission, between 9.5 percent and 10 percent for generation and between 9 percent and 9.5 percent for distribution investments. We believe this growth will be achieved if our capital program is completed in accordance with our plans, distribution rate case orders enable us to earn the assumed Regulatory ROEs and FERC's present transmission policies remain consistent and enable us to achieve projected transmission ROEs.

Liquidity

Consolidated: We had $416.8 million of cash and cash equivalents on hand at March 31, 2009, compared with $89.8 million at December 31, 2008. During the first quarter of 2009, our cash position increased primarily as a result of the proceeds of $370.8 million from the issuance of 18,975,000 common shares on March 20, 2009, net of underwriting commissions of $12.5 million, and the issuance of $250 million of first mortgage bonds by CL&P on February 13, 2009.

On April 1, 2009, Yankee Gas retired through borrowings from the NU Money Pool $50 million of first mortgage bonds carrying a coupon of 6.2 percent that were issued in January 1999. Yankee Gas does not plan to issue additional long-term debt in 2009.

On April 2, 2009, CL&P completed the remarketing of $62 million of tax-exempt PCRBs it had elected to acquire in October 2008. The bonds carry a coupon of 5.25 percent until the mandatory tender for purchase on April 1, 2010, and have a final maturity of May 1, 2031.

On February 20, 2009, PSNH filed an application with the NHPUC to issue $150 million of first mortgage bonds. Subject to regulatory approval, PSNH currently expects to issue the bonds in the second half of 2009. No other debt or equity financings are planned by NU or its subsidiaries in 2009, and we have only a . . .