Eversource 2009 Annual Report Download - page 25

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Item 1A. Risk Factors
We are subject to a variety of significant risks in addition to the matters set forth under "Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995" in Item 1, Business, above. Our susceptibility to certain risks, including those discussed in
detail below, could exacerbate other risks. These risk factors should be considered carefully in evaluating our risk profile.
The actions of regulators can significantly affect our earnings, liquidity and business activities.
The rates that our regulated companies charge their respective retail and wholesale customers are determined by their state utility
commissions and by FERC. These commissions also regulate the companies’ accounting, operations, the issuance of certain
securities and certain other matters. FERC also regulates their transmission of electric energy, the sale of electric energy at wholesale,
accounting, issuance of certain securities and certain matters. The commissions’ policies and regulatory actions could have a material
impact on the regulated companies’ financial position, results of operations and liquidity.
Our transmission and distribution systems may not operate as expected, and could require unplanned expenditures which
could adversely affect our earnings and cash flows.
The ability to manage the operations of our transmission and distribution systems is critical to the financial performance of our business.
Our transmission and distribution businesses face several operational risks, including the breakdown or failure of or damage to
equipment or processes (especially due to age), accidents and labor disputes. The costs (both labor and material) that our regulated
companies incur to construct and maintain their electric delivery systems have increased in recent years. These increases have been
driven primarily by higher demand for commodities and electrical products, as well as increased demand for skilled labor. A high
percentage of our regulated company equipment, such as distribution poles, underground primary cables and substation switchgear is
old or obsolete, or nearing or at the end of its life cycle. The failure of our transmission and distributions systems to operate as planned
may result in increased capital investments, reduced earnings or unplanned increases in operation and maintenance costs. Such costs
which are not recoverable from our customers would have an adverse effect on our earnings.
Limits on our access to capital may adversely impact our ability to execute our business plan.
We use short-term debt and the long-term capital markets as a significant source of liquidity and funding for capital requirements not
obtained from our operating cash flow. If access to these sources of liquidity becomes constrained, our ability to implement our
business strategy could be adversely affected. Events beyond our control, such as the disruption in global capital and credit markets in
2008, or a downgrade of our credit ratings, could increase our cost of borrowing and cost of capital or restrict our ability to access the
capital markets and negatively affect our ability to maintain and to expand our businesses.
Our counterparties may not meet their obligations to us.
We are exposed to the risk that counterparties to various arrangements who owe us money, or contracted to supply us with energy,
coal, or other commodities or services, will not be able to perform their obligations or, with respect to our credit facilities, fail to honor
their commitments. Should the counterparties to commodity arrangements fail to perform their obligations, we might be forced to
replace the underlying commitment at higher market prices. Should any more lenders under our credit facilities fail to perform, the level
of borrowing capacity under those arrangements could decrease. In such an event, our results of operations, financial position, or
liquidity could be adversely affected.
Changes in regulatory or legislative policy and/or regulatory decisions, difficulties in obtaining siting, design or other
approvals, global demand for critical resources, environmental or other concerns, or construction of new generation may
delay completion of or displace our planned transmission projects or adversely affect our ability to recover our investments
or result in lower than expected rates of return.
The successful implementation of our transmission construction plans could be affected by new legislation, regulations or judicial or
regulatory interpretations of applicable law or regulations or regulatory decisions, delays in obtaining approvals or difficulty in obtaining
critical resources required for construction. Any of such events could cause delays in our construction schedule adversely affecting our
ability to achieve forecasted earnings.
The regulatory approval process for our planned transmission projects encompasses an extensive permitting, design and technical
approval process. Various factors could result in increased cost estimates and delayed construction. These include environmental and
community concerns and design and siting issues. Recoverability of all such investments in rates may be subject to prudence review at
the FERC. While we believe that all such expenses have been and will be prudently incurred, we cannot predict the outcome of future
reviews should they occur.
In addition, to the extent that new generation facilities are proposed or built to address the region’s energy needs, our planned
transmission projects may be delayed or displaced, which could result in reduced transmission capital investments, reduced earnings,
and limited future growth prospects.
Many of our currently planned transmission projects are expected to help alleviate identified reliability issues and to help reduce
customers' costs. However, if, due to further regulatory or other delays, the projected in-service date for one or more of these projects