Northeast Utilities Corporate Governance

Compensation Committee Charter

The Compensation Committee of the Board of Trustees of Northeast Utilities is responsible for oversight of the compensation and benefits programs for all executives¹ and trustees of the Northeast Utilities System (the Company) with overall authority to establish and interpret the terms of the Company’s executive salary and incentive programs. The goal of these programs is to attract and retain highly qualified individuals with skills suited to the needs of the Company and to appropriately motivate and reward performance that will lead to enhancement of shareholder value.

Purpose

The purpose of the Compensation Committee is: (a) to discharge the Board's responsibilities relating to compensation and benefits of NU System executives and trustees; and (b) to prepare, in accordance with applicable rules and regulations of the Securities and Exchange Commission, the Compensation Committee Report to be provided in the Company annual proxy statement.

Committee Membership

The Compensation Committee shall consist of no fewer than five members. The members of the Compensation Committee shall meet the independence requirements of the New York Stock Exchange. Members of the Committee shall also qualify as “non-employee directors” within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and shall satisfy any other necessary standards of independence under the federal securities and tax laws. Trustees serving on the Compensation Committee shall have sufficient knowledge and familiarity in the area of compensation practices and policies to discharge the duties and responsibilities of the Compensation Committee.

The members of the Compensation Committee shall be appointed annually by the Board on the recommendation of the Corporate Governance Committee. One of the members of the Compensation Committee shall be designated by the Board to be Chair. Compensation Committee members may be removed by the majority vote of the independent Trustees at any time.

Meetings

The Compensation Committee shall meet as often as it determines, but not less frequently than four times per year. The Chair shall chair all regular sessions of the Compensation Committee and set the agendas for the Compensation Committee meetings.

Committee Authority and Responsibilities

The Compensation Committee shall have the authority to delegate its responsibilities to subcommittees (consisting of one or more members of the Compensation Committee) as the Compensation Committee sees fit.

The Compensation Committee shall have sole authority to retain and terminate such compensation consultants, outside counsel and other advisors as the Committee may deem appropriate. The Committee or its Chair acting on behalf of the Committee shall have sole authority to approve related fees and retention terms.

The Compensation Committee shall make regular reports to the Board. The Compensation Committee shall maintain minutes of its meetings and provide copies of the minutes to the Board. The Compensation Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Corporate Governance Committee for approval. The Compensation Committee shall annually review the Compensation Committee’s own performance and report its findings to the Board.

The Compensation Committee, as necessary or appropriate, shall:

Executive Compensation

1. Establish NU's executive compensation philosophy and policy.



2. Review and approve executive compensation and benefit plans and programs (including structure, target award levels, and payouts thereunder) for NU and its subsidiary companies. Periodically evaluate the competitiveness and effectiveness of its programs and plans.



3. Review and approve any equity compensation plans that are not subject to shareholder approval.



4. Approve, or recommend to the Board as the circumstances require, such matters as are specifically provided for by system plans, such as the annual goals and objectives and the total amount of monies available, for the system pursuant to the incentive compensation plan for executives.



5. Review and approve the compensation and benefits of each executive of the NU System.



6. Review and approve all executive employment agreements, executive compensation arrangements and executive termination and severance arrangements.


CEO Compensation


7. Working with the Corporate Governance Committee, review and approve corporate goals and objectives relevant to Chief Executive Officer compensation and evaluate the performance of the Chief Executive Officer in light of those goals and objectives.



8. Recommend to the Board's independent Trustees the compensation level of the Chief Executive Officer. In determining the long-term incentive component of the Chief Executive Officer's compensation, the Compensation Committee shall consider (among other factors at the discretion of the Compensation Committee) the performance and relative shareholder return for NU, the value of similar incentive awards to chief executive officers at comparable companies and the awards given to the Chief Executive Officer in past years.


Employee Compensation


9. Review and approve overall equity grants for non-executive employees of the Company and its subsidiaries as authorized under relevant plans.
   
   
10. Review and approve retirement benefit plans and major amendments.
    
    Trustee Compensation
    
    
11. Review and approve the compensation of members of the Board of Trustees who are not employees of the Company.


Succession Planning


12. Engage in a succession planning process for the Chief Executive Officer jointly with the Corporate Governance Committee.
    
    Other Matters
    
    
13. Review and discuss with management the Compensation Discussion and Analysis required by Securities and Exchange Commission regulations and, based on such review and discussions, recommend to the Board of Trustees whether such Compensation Discussion and Analysis be included in the Company's annual proxy statement (or annual report on Form 10-K, as appropriate). Prepare, in accordance with applicable rules and regulations of the Securities and Exchange Commission, the Compensation Committee Report to be provided in the Company's annual proxy statement.
    
    
14. Review such other matters within the scope of its responsibilities as the Compensation Committee shall determine from time to time, and make such recommendations to the Board with respect thereto as the Compensation Committee deems appropriate.

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¹ Executive shall mean an officer who participates in the Company's executive compensation programs.

Effective: September 12, 2006

Last updated as of 9/12/06

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