UIL HOLDINGS CORPORATION DEFERRED COMPENSATION PLAN

EXHIBIT 10.42

UIL HOLDINGS CORPORATION

DEFERRED COMPENSATION PLAN

NON-GRANDFATHERED BENEFIT PROVISIONS

originally adopted effective January 27, 2003,

as amended through August 4, 2008

TABLE OF CONTENTS

UIL HOLDINGS CORPORATION

DEFERRED COMPENSATION PLAN

NON-GRANDFATHERED BENEFIT PROVISIONS

INTRODUCTION

Effective as of February 1, 2003, UIL Holdings Corporation (the "Company") established the UIL Holdings Corporation Deferred Compensation Plan to provide a select group of its senior management and the senior management of its selected Business Units with the opportunity to accumulate capital by deferring compensation on a pre-tax basis, and to provide the Company and its Business Units with a method of rewarding and retaining top executives and managerial employees.  The Plan also permits those eligible executive employees whose matching allocations under the United Illuminating Company 401(k)/Employee Stock Ownership Plan ("UI KSOP") would be limited by virtue of their Compensation Deferrals under this Plan to make up for such limitations with certain supplemental benefits, and provides non-Employee Directors of the Company with a means to defer receipt of certain shares of Restricted Stock and Performance Share awards.

The terms of the Plan as set forth in this Plan document apply solely with respect to deferrals made pursuant to the terms of the Plan on and after January 1, 2005 and with respect to deferrals made pursuant to the terms of the Plan before January 1, 2005 that vest on or after January 1, 2005.  With respect to deferrals made and vested pursuant to the terms of the Plan prior to January 1, 2005, the terms of the Plan are as described in the separate Plan document relating to “Grandfathered Benefits.”  With respect to amounts subject to this Plan document, this Plan document supersedes the prior Plan document (as amended from time to time).

ARTICLE I

TITLE AND DEFINITIONS

Capitalized terms used in this Plan, shall have the meanings specified below.

" Account " or " Accounts " shall mean a Participant's Non-Grandfathered Amounts under this Plan, including all subaccounts as are specifically authorized for inclusion in this portion of the Plan.

“ Affiliate ” shall mean any corporation, trade or business that, together with the Company, is treated as a single employer under Code Section 414(b) or (c).

" Base Salary " shall mean an Eligible Employee's annual base salary, excluding commissions, incentive and all other remuneration for services rendered to the Company, but prior to reduction for any salary contributions to a plan established pursuant to Sections 125 or 132(f) of the Code or qualified pursuant to Section 401(k) of the Code.

" Beneficiary " or " Beneficiaries " shall mean the person or persons, including a trustee, personal representative or other fiduciary, last designated in writing by a Participant in accordance with procedures established by the Committee to receive the benefits specified hereunder in the event of the Participant's death.  No beneficiary designation shall become effective until it is filed with the Committee (or the Recordkeeper).  Any designation shall be revocable at any time through a written instrument filed

by the Participant with the Committee (or the Recordkeeper) with or without the consent of the previous Beneficiary, provided, however, that no designation of a Beneficiary other than the Participant's spouse shall be valid unless consented to in writing by such spouse.  If there is no such designation or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the Beneficiary.  If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate shall be the Beneficiary.  In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder.  In the event any amount is payable under the Plan to a minor, payment shall not be made to the minor, but instead be paid to such minor's legal guardian duly appointed and currently acting to hold the funds for such minor.  If no guardian of the estate for the minor is duly appointed and currently acting within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor.  Payment by the Company pursuant to any unrevoked Beneficiary designation, or to the Participant's estate if no such designation exists, of all benefits owed hereunder shall terminate any and all liability of the Company.

" Board of Directors " or " Board " shall mean the Board of Directors of UIL Holdings Corporation.

" Business Unit " means The United Illuminating Company ("UI") and any other subsidiary of the Company which, with the consent of the Board, has adopted the Plan.  Business Units shall be listed on Exhibit A to the Plan.

A " Change in Control " of the Company or any Business Unit (an “Employing Company”) occurs on the date on which any of the following events occur:  a change in the ownership of the Employing Company;  a change in the effective control of the Employing Company; and a change in the ownership of a substantial portion of the assets of the Employing Company.

For purposes of this definition:

In determining whether a person or group has acquired a percentage of stock, stock of the Company held pursuant to the terms of an employee benefit plan of the Company or any subsidiary thereof in a suspense account or otherwise unallocated to a participant’s account shall be disregarded to the extent that expressing the applicable percentage as a fraction, such shares shall not be included in the numerator, but such shares will be included in the denominator.

An event constitutes a Change in Control with respect to a Participant only if the Participant performs services for the Employing Company that has experienced the Change in Control, or the Participant’s relationship to the affected Employing Company otherwise satisfies the requirements of Treasury Regulation Section 1.409A-3(2)(i)(5)(ii).

" Code " shall mean the Internal Revenue Code of 1986, as amended.

“ Committee ” shall mean the Compensation and Executive Development Committee of the Board (or such other committee as shall be designated by the Board).

" Company " shall mean UIL Holdings Corporation, a Connecticut corporation.

" Company Discretionary Contribution " shall mean such discretionary contributions, if any, credited by the Company to the Company Discretionary Contribution Subaccount of a Participant for a Plan Year.  Such contribution may differ from Participant to Participant both in amount (including no contribution) and as a percentage of Compensation.

" Company Discretionary Contribution Subaccount " shall mean the bookkeeping account maintained by the Company for each Participant that is credited with an amount equal to (i) the Company Discretionary Contribution Amount, if any, paid by the Company, and (ii) net earnings and losses attributable thereto.

" Company Matching Contribution " shall mean such matching contributions, if any, made by the Company with respect to a Participant, in order to make up for the loss of a matching contribution under the UI KSOP resulting from the Participant's Compensation Deferrals under this Plan.

" Company Matching Contribution Subaccount " shall mean the bookkeeping account maintained by the Company for each Participant that is credited with an amount equal to (i) the number of Stock units equal in value to the Company Matching Contributions, if any, and the Dividend Equivalents, if any, paid by the Company, plus (ii) net earnings and losses attributable thereto.

“ Compensation ” shall mean, in the case of all Eligible Employees, Base Salary, increases in Base Salary received during the Plan Year, incentive awards, deferrals of compensation in

excess of the amount deductible under Section 162(m) of the Code, and any other compensation permitted by the Committee to be deferred.

" Compensation Deferrals " shall mean the compensation deferred by a Participant pursuant to Section 3.1 of this Plan.

" Compensation Deferral Subaccount " shall mean the bookkeeping account maintained by the Recordkeeper for each Participant that is credited with amounts equal to (i) the portion of the Participant's Compensation that he or she elects to defer, and (ii) net earnings and losses attributable thereto.

“ Designated Individuals ” shall mean those Eligible Employees and Eligible Directors designated as eligible to defer Restricted Stock Awards and/or Performance Shares Awards.

“ Disability ” or “ Disabled ” shall mean that the Participant is, by reason of any medically-determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, (i) unable to engage in any substantial gainful activity, or (ii) receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participant’s employer.  The Committee shall determine whether a Participant is Disabled in accordance with Code Section 409A and related regulations, provided, however, that a Participant shall be deemed to be Disabled if determined to be totally disabled by the Social Security Administration or if the Participant becomes eligible for disability benefits under the Company’s long-term disability plan.

" Distributable Amount " shall mean the vested balance in the Participant's Accounts subject to distribution in a given Plan Year.

" Dividend Equivalents " shall mean the amount of cash dividends or other cash distributions paid by the Company on that number of shares equal to the number of Stock Units credited to a Participant's Stock Unit Subaccount as of the applicable record date for the dividend or other distribution, which amount shall be credited in the form of additional Stock Units to the Participant's Stock Unit Subaccount.

" Effective Date " of the Plan means February 1, 2003.

“ Election Period ” shall mean the time period provided to elect to defer Compensation under the Plan, as provided in Section 3.1.

“Eligible Director” shall mean each non-Employee Director of the Company who is eligible to participate in the Plan, as determined in Section 2.1.

" Eligible Employee " shall mean each Employee of the Company or a participating Business Unit who is eligible to participate in the Plan, as determined in Section 2.1.

" Eligible Person " shall mean each Eligible Employee or Eligible Director of the Company or a participating Business Unit, to the extent that such individual is eligible to participate in the Plan, as determined in Section 2.1.

" Employer " shall mean the Company and its Affiliates.

" ERISA " shall mean the Employee Retirement Income Security Act of 1974, as amended.

" Exchange Act " shall mean the Securities Exchange Act of 1934, as amended.

" Fund " or " Funds " shall mean one or more of the investment funds selected by the Committee pursuant to Section 3.2.

" Hardship Distribution " shall mean a distribution made on account of an Unforeseeable Emergency as defined for purposes of Code Section 409A, including Treasury Regulation Section 1.409A-3(i)(3).  Generally, this means a severe financial hardship of the Participant resulting from a sudden and unexpected illness or accident of the Participant or of his or her spouse, beneficiary or dependent, loss of a Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

" Investment Rate " shall mean, for each Fund, an amount equal to the closing price of such Fund during each business day, recorded for internal reporting to the Company on a monthly basis and reported to Participants on a calendar quarterly basis.

“ Non-Grandfathered Amount ” means any amount deferred under the Plan which is not a Grandfathered Amount.  A “Grandfathered Amount” means the vested Account Balances of Plan Participants determined as of December 31, 2004, together with actual or notional earnings thereon accruing after December 31, 2004.  Non-Grandfathered Amounts shall be subject to requirements of Code Section 409A and the terms of this Plan document.  Grandfathered Amounts shall be subject to the terms of the Plan document entitled “UIL Holdings Corporation Deferred Compensation Plan Grandfathered Benefit Provisions.”

" Participant " shall mean any Eligible Person who becomes a Participant in this Plan in accordance with Article II.

" Payment Date " shall mean the date for payment of Distributable Amounts, as provided in Article VI.

“ Performance Share Award ” or “Performance Share” shall mean a long-term incentive performance share award which, if deferred under this Plan, is credited in Stock Units when such Performance Share is vested at the end of the performance period, and which is settled in shares of Company Stock that may be drawn from this Plan, the UIL Holdings Corporation 1999 Amended and Restated Stock Plan, the UIL Holdings Corporation 2008 Stock and Incentive Compensation Plan or any other stock plan of the Company which allows for awards to be deferred pursuant to the terms of this Plan, to the extent permitted under the terms of said plans.

" Plan " shall mean the UIL Holdings Corporation Deferred Compensation Plan.  The terms of the Plan are reflected in this document entitled “UIL Holdings Corporation Deferred Compensation Plan – Non-Grandfathered Benefit Provisions” and the document entitled “UIL Holdings Corporation Deferred Compensation Plan – Grandfathered Benefit Provisions.”

" Plan Year " shall mean January 1 to December 31 of each year.

“ Recordkeeper ” shall mean the administrator appointed by the Committee.  As of February 1, 2003, TBG Financial was appointed the Recordkeeper.

" Restricted Stock " shall mean shares of Stock issued under the Restricted Stock feature of the UIL Holdings Corporation 1999 Amended and Restated Stock Plan, the UIL Holdings Corporation 2008 Stock and Incentive Compensation Plan or any other stock plan of the Company, which shares are subject to forfeiture based on non-compliance with certain enumerated criteria.

“ Restricted Stock Award ” shall mean any award of Restricted Stock which, if deferred under this Plan, shall be credited as Restricted Stock Units, and which is settled in shares of Company Stock that may be drawn from this Plan, the UIL Holdings Corporation 1999 Amended and Restated Stock Plan, the UIL Holdings Corporation 2008 Stock and Incentive Compensation Plan or any other stock plan of the Company which allows for awards to be deferred pursuant to the terms of this Plan, to the extent permitted under the terms of said plans.

" Retirement " shall mean termination of service after the Participant has satisfied the age and service requirements for early retirement under the terms of The United Illuminating Company Pension Plan.

" Scheduled In-Service Withdrawal Date " shall mean February of the year elected by the Participant to withdraw, or begin to withdraw, balances attributable to amounts deferred in a given Plan Year, and earnings and losses attributable thereto.  A Participant’s Scheduled In-Service Withdrawal Date in a given Plan Year may be no earlier than three years from the last day of the Plan Year for which Compensation Deferrals, deferrals of Restricted Stock, deferrals of Performance Shares, and contributions of Company Discretionary and Matching Contribution Amounts, are made; expressly provided, however, that in the case of the deferrals of Restricted Stock, Performance Shares, and any other Compensation subject to a vesting schedule, the three year period shall be deemed to begin running from the date on which such Restricted Stock, Performance Shares or Compensation would otherwise vest.

“ Separation from Service ” shall mean a Separation from Service within the meaning of Code Section 409A and related regulations.  The Committee will determine, in accordance with Code Section 409A, whether a Separation from Service has occurred.

“ Specified Employee ” means a Specified Employee as defined for purposes of Code Section 409A and related regulations.  Specified Employee means an Employee who, as of the date of his or her Separation from Service, is a “key employee” of the Company or any Affiliate, any stock of which is actively traded on an established securities market or otherwise.  An Employee is a key employee if he or she meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with applicable regulations thereunder and without regard to Code Section 416(i)(5)) at any time during the 12-month period ending on the Specified Employee Identification Date.  Such Employee shall be treated as a key employee for the entire 12-month period beginning on the Specified Employee Effective Date.  In the event of corporate transactions described in Treasury Regulation Section 1.409A-1(i)(6), the identification of Specified Employees shall be determined in accordance with the default rules described therein, unless the Committee elects to utilize the available alternative methodology through designations made within the timeframes specified therein.  For purposes of this definition, Specified Employee Effective Date means the first day of the fourth month following the Specified Employee Identification Date, or such earlier date as is selected by the Committee; and Specified Employee Identification Date means December 31, unless the Committee has elected a different date through action that is legally binding with respect to all nonqualified deferred compensation plans maintained by the Company.

" Stock " shall mean common stock of UIL Holdings Corporation, or any successor to UIL Holdings Corporation.

" Stock Fund " or " Company Stock Fund " shall mean the deemed, unitized, investment Fund established to record (i) Participants' deemed investments in Stock Units, (ii) Designated Individuals' deferrals of Restricted Stock in Stock Units, (iii) Company Matching Contributions invested in Stock Units, (iv) Stock Units credited to Participants’ Accounts upon the vesting of deferred Performance Shares, and (v) Dividend Equivalents deemed reinvested in Stock Units.  The Company has reserved 83,333 (post split) shares of Company Stock for deemed investment in this Plan.  Such Stock Units shall be settled in Shares of Company Stock that may be drawn from this Plan, the UIL Holdings Corporation 1999 Amended and Restated Stock Plan, the UIL Holdings Corporation 2008 Stock and Incentive Compensation Plan or any other stock plan of the Company which allows for awards to be deferred pursuant to the terms of this Plan, to the extent permitted under the terms of said plans.

“ Stock Unit ” shall mean a unit of value, equivalent to the value of a share of Stock, or Restricted Stock, or a Performance Share, established by the Committee as a means of measuring value of the Stock-related portion of an Account under the Plan.

“ Stock Unit Subaccount ” shall mean the bookkeeping account maintained by the Committee on behalf of each Participant who is credited with Stock Units and, as applicable, Dividend Equivalents, resulting from Compensation Deferrals, Company Matching Contributions deemed invested in Stock Units, deferred Restricted Stock Units and deferred Performance Shares.

“ Unforeseeable Emergency ” shall mean the circumstances under which a Hardship Distribution may be made.

ARTICLE II

PARTICIPATION

All officers of the Company and its Business Units who have been selected by the Committee shall be eligible to participate in this Plan.  Any other key management or highly compensated Employee from time to time designated by the Committee to be eligible to participate shall also be considered an Eligible Employee under the Plan.

Non-Employee Directors of the Company and its Participating Business Units shall be eligible to participate in that portion of the Plan permitting deferral of Restricted Stock and Performance Shares.  Such Directors shall be eligible to participate prospectively in that portion of the Plan permitting elective deferrals of Compensation and other features of the Plan, to the extent that they are made applicable to Directors through subsequent Plan amendment.  A Director shall be deemed an Eligible Person with respect to elective deferrals of Compensation (including fees and retainers) and other features of the Plan at such time as such provisions are made applicable to the Directors.

Notwithstanding the foregoing, this portion of the Plan applies only to Eligible Employees and Directors who are Eligible Persons on or after January 1, 2005, and only Non-Grandfathered Amounts shall be subject to the terms of this Plan document.

2.2            Enrollment; Duration of Participation .

An Eligible Person shall become a Participant in the Plan by filing a Deferral Election in accordance with Section 3.1 during an Election Period, in accordance with such procedures as may be established from time to time by the Committee.  An individual who, at any time, ceases to be an Eligible Person as determined in the discretion of the Committee shall not be permitted to enter into future Deferral Elections, and no such Deferral Elections will be allowed until such time as the individual again becomes an Eligible Person; expressly provided, however, that nothing herein shall prohibit the Company from giving effect to any previously filed Deferral Election that was timely made.  An individual shall remain a Participant in the Plan with respect to amounts already deferred that have not yet been distributed or forfeited.

2.3            Transfers to Non-Participating Related Companies .

An Eligible Employee who becomes employed by an Affiliate which is not a participating Business Unit, shall no longer be eligible to make any future deferral elections under the Plan.  However, such individual shall remain a participant in the Plan with respect to amounts already deferred and deferral elections that became irrevocable prior to the date of transfer.

2.4            Amendment of Eligibility Criteria .

The Committee may change the criteria for eligibility on a prospective basis.

ARTICLE III

DEFERRAL ELECTIONS

(a)   Election to Defer .  Subject to the provisions of Article II and this Article III, each Eligible Employee may elect to defer Compensation earned for services after the Election Period ends, by filing an election with the Recordkeeper (a "Deferral Election") that conforms to the requirements of this Section 3.1 either via the internet or mail, on a form provided by the Recordkeeper, by no later than the last day of the Election Period.  Except as expressly provided in (b), (c) or (d) below, an Eligible Person may elect to defer Compensation by an election filed by December 20th (or such later date as determined by the Committee, but in no event later than December 31st) of the year preceding the year in which the services are to be performed and the Compensation earned.  Deferral elections shall become irrevocable as of the last day of the Election Period and shall remain irrevocable for any subsequent Plan Year to which such Deferral Election relates, except as otherwise expressly provided in the Plan.  Except as otherwise determined by the Committee, Deferral Elections will continue in effect from Plan Year to Plan Year, unless decreased, increased, or terminated during an Election Period with respect to a subsequent Plan Year.

(b)   First Year of Eligibility .  An Eligible Person shall have a 30 day Election Period beginning as of the date the Eligible Person becomes eligible to participant in the Plan in which to file an initial Deferral Election, provided that the Eligible Person has not participated in any other account balance nonqualified deferred compensation plan maintained by the Company.  Any such Deferral Election shall only be effective with respect to Compensation earned for services to be rendered after the Deferral Election is made.  The amount of annual incentive Compensation that is subject to a first year Deferral Election must be pro-rated, with such pro-ration being based on the days remaining in the calendar year from the date of the election, divided by 365.

                      (c)   Deferral of Performance Share Awards .  The Election Period with respect to the deferral by a Designated Individual of some portion or all of a Performance Share Award shall be any period designated by the Committee, which ends no later than 6 months prior to the end of the performance period related to such Performance Share Award (12 months in the case of Deferral Elections filed prior to January 1, 2007), provided that in no event may an election to defer Performance Shares be made (i) if the performance period is not at least 12 consecutive months in duration, or (ii) after such compensation has become both substantially certain to be paid and readily ascertainable.  In addition, the Designated Individual must have provided services continuously from the later of the beginning of the performance period or the date the performance criteria are established through the date that the Deferral Election is filed.  All deferrals of Performance Shares shall be credited as, and invested only in, Stock Units, without voting rights or any property right.

                      (d)   Deferral of Restricted Stock Units .  The Election Period with respect to deferral by a Designated Individual of some portion or all of a Restricted Stock Unit Award shall be the taxable year ending on December 20th (or such later date as determined by the Committee, but in no event later than December 31st) prior to the year in which such Award is granted, and which shall be deemed effective contemporaneously with the granting of such Award with respect to any Restricted Stock Unit vesting at least one year after such Election.  Notwithstanding the foregoing, with respect to deferrals of Restricted Stock Unit Awards made in 2006 and later, the Election Period with respect to the deferral by a Designated Individual of some portion or all of a Restricted Stock Unit Award shall be a date that ends no later than the thirtieth day following the date of the grant, provided that the Deferral Election is made at least 12 months in advance of the earliest vesting date applicable to such award.  Notwithstanding anything to the contrary, any deferral of Restricted Stock shall be deemed to be a rejection of the

Restricted Stock Award and a simultaneous award of Restricted Stock Units, all effective as of the date of such Award.  All deferrals of Restricted Stock Units shall be credited as, and invested only in, Stock Units, without voting rights or any property right.

(e)   Deferral Amounts .  Subject to the provisions of this Section 3.1 with respect to each Plan Year, an Eligible Employee may defer, in either whole percentages or a flat dollar amount, up to 85% of Annual Base Salary and up to 100% of increases in Base Salary that become effective during the year following the year of the Deferral Election; and up to 100% of incentive awards (including Performance Share Awards and Restricted Stock Unit Awards).  Notwithstanding the foregoing, the total amount deferred shall be limited, as necessary, to satisfy income tax and Social Security Tax (including Medicare) withholding obligations, and employee benefit plan withholding requirements as determined in the sole and absolute discretion of the Committee.  The minimum contribution that must be made in any Plan Year by an Eligible Employee shall not be less than $5,000, which may be satisfied from any deferral source (e.g., Base Salary, annual incentive, etc.).

(f)   Mandatory Deferral of Excess Code Section 162(m) Compensation .  Notwithstanding anything in the foregoing to the contrary, to the extent that any Compensation to be paid to an Eligible Employee with respect to a taxable year would exceed the amount deductible by the Company or a Business Unit under Section 162(m) of the Code (the “Excess”), such Excess automatically shall be deferred under the terms of this Plan without the necessity of an election to defer.  Such deferred Excess shall be held and administered as a Compensation Deferral subject to the terms of the Plan, provided that, irrespective of the Employee’s election as to timing and form of payment under Section 3.3, no deferred Excess shall be distributed to the affected Employee pr