Eversource 2013 Annual Report Download - page 34

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Migration of customers from PSNH energy service to competitive energy suppliers may increase the cost to the remaining
customers of energy produced by PSNH generation assets.
The competitiveness of PSNH’s ES rates are sensitive to the cost of fuels, most notably natural gas, and customer load. Recently,
PSNH’s ES rate has been higher than competitive energy prices offered to some customers. Further increases may occur as the costs
associated with the Clean Air Project are included in rates. Customers remaining on PSNH’s ES rate may experience an increase in
cost due to the lower base over which to recover PSNH's fixed generation costs. Any such increase may in turn cause further migration
and further impact PSNH’s ES rate. This trend could lead to PSNH continuing to lose energy supply customers and increasing the
burden of supporting the cost of its generation facilities on remaining customers and being unable to support the cost of its generation
facilities through an ES rate, which could have an adverse impact on its financial position, results of operations and cash flows.
Judicial or regulatory proceedings or changes in regulatory or legislative policy could jeopardize full recovery of costs
incurred by PSNH in constructing the Clean Air Project.
Pursuant to New Hampshire law, PSNH placed the Clean Air Project in service at its Merrimack Station. PSNH’s recovery of costs in
constructing the project is subject to prudence review by the NHPUC. A material prudence disallowance could adversely affect PSNH’s
financial position, results of operations or cash flows. While we believe we have prudently incurred all expenditures to date, we cannot
predict the outcome of any prudence reviews. Our projected earnings and growth could be adversely affected were the NHPUC to
deny recovery of some or all of PSNH’s investment in the project.
The loss of key personnel or the inability to hire and retain qualified employees could have an adverse effect on our business,
financial position and results of operations.
Our operations depend on the continued efforts of our employees. Retaining key employees and maintaining the ability to attract new
employees are important to both our operational and financial performance. We cannot guarantee that any member of our
management or any key employee at the NU parent or subsidiary level will continue to serve in any capacity for any particular period of
time. In addition, a significant portion of our workforce, including many workers with specialized skills maintaining and servicing the
electrical infrastructure, will be eligible to retire over the next five to ten years. Such highly skilled individuals cannot be quickly replaced
due to the technically complex work they perform. We have developed strategic workforce plans to identify key functions and
proactively implement plans to assure a ready and qualified workforce, but cannot predict the impact of these plans on our ability to hire
and retain key employees.
Market performance or changes in assumptions require us to make significant contributions to our pension and other post-
employment benefit plans.
We provide a defined benefit pension plan and other post-retirement benefits for a substantial number of employees, former employees
and retirees. Our future pension obligations, costs and liabilities are highly dependent on a variety of factors beyond our control. These
factors include estimated investment returns, interest rates, discount rates, health care cost trends, benefit changes, salary increases
and the demographics of plan participants. If our assumptions prove to be inaccurate, our future costs could increase significantly. In
2008 and 2009, due to the financial crisis, the value of our pension assets declined. As a result, in 2013, NU made contributions to the
NUSCO Pension Plan totaling $202.7 million and NSTAR Electric contributed $82 million to the NSTAR Pension Plan. We expect to
make contributions in 2014 totaling $71.6 million. In addition, various factors, including underperformance of plan investments and
changes in law or regulation, could increase the amount of contributions required to fund our pension plan in the future. Additional
large funding requirements, when combined with the financing requirements of our construction program, could impact the timing and
amount of future equity and debt financings and negatively affect our financial position, results of operations or cash flows.
Costs of compliance with environmental regulations, including climate change legislation, may increase and have an adverse
effect on our business and results of operations.
Our subsidiaries' operations are subject to extensive federal, state and local environmental statutes, rules and regulations that govern,
among other things, air emissions, water discharges and the management of hazardous and solid waste. Compliance with these
requirements requires us to incur significant costs relating to environmental monitoring, installation of pollution control equipment,
emission fees, maintenance and upgrading of facilities, remediation and permitting. The costs of compliance with existing legal
requirements or legal requirements not yet adopted may increase in the future. An increase in such costs, unless promptly recovered,
could have an adverse impact on our business and our financial position, results of operations or cash flows.
In addition, global climate change issues have received an increased focus from federal and state governments, which could potentially
lead to additional rules and regulations that impact how we operate our business, both in terms of the power plants we own and operate
as well as general utility operations. Although we would expect that any costs of these rules and regulations would be recovered from
customers, their impact on energy use by customers and the ultimate impact on our business would be dependent upon the specific
rules and regulations adopted and cannot be determined at this time. The impact of these additional costs to customers could lead to a
further reduction in energy consumption resulting in a decline in electricity and gas sales in our service territories, which would have an
adverse impact on our business and financial position, results of operations or cash flows.
Any failure by us to comply with environmental laws and regulations, even if due to factors beyond our control, or reinterpretations of
existing requirements, could also increase costs. Existing environmental laws and regulations may be revised or new laws and
regulations seeking to protect the environment may be adopted or become applicable to us. Revised or additional laws could result in