Xcel Energy 2013 Annual Report Download - page 60

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A disruption of the regional electric transmission grid, interstate natural gas pipeline infrastructure or other fuel sources, could
negatively impact our business. Because our generation, transmission systems and local natural gas distribution companies are part of
an interconnected system, we face the risk of possible loss of business due to a disruption caused by the actions of a neighboring
utility or an event (severe storm, severe temperature extremes, generator or transmission facility outage, pipeline rupture, railroad
disruption, sudden and significant increase or decrease in wind generation, or any disruption of work force such as may be caused by
flu or other epidemic) within our operating systems or on a neighboring system. Any such disruption could result in a significant
decrease in revenues and significant additional costs to repair assets, which could have a material impact on our financial condition
and results.
The degree to which we are able to maintain day-to-day operations in response to unforeseen events will in part determine the
financial impact of certain events on our financial condition and results. It is difficult to predict the magnitude of such events and
associated impacts.
A cyber incident or cyber security breach could have a material effect on our business.
We operate in a highly regulated industry that requires the continued operation of sophisticated information technology systems and
network infrastructure. In addition, in the ordinary course of business, we use our systems and infrastructure to create, collect, use,
disclose, store, dispose of and otherwise process sensitive information, including company data, customer energy usage data, and
personal information regarding customers, employees and their dependents, contractors, shareholders and other individuals.
Our generation, transmission, distribution and fuel storage facilities, information technology systems and other infrastructure or
physical assets, as well as the information processed in our systems (e.g., information about our customers, employees, operations,
infrastructure and assets) could be directly or indirectly affected by unintentional or deliberate cyber security incidents, including
those caused by human error. Our industry has begun to see an increased volume and sophistication of cyber security incidents from
international activist organizations, Nation States, and individuals. Cyber security incidents could harm our businesses by limiting our
generating, transmitting and distributing capabilities, delaying our development and construction of new facilities or capital
improvement projects to existing facilities, disrupting our customer operations, or exposing us to liability. Our generation,
transmission systems and natural gas pipelines are part of an interconnected system. Therefore, a disruption caused by the impact of a
cyber security incident of the regional electric transmission grid, natural gas pipeline infrastructure or other fuel sources of our third
party service providers’ operations, could also negatively impact our business. In addition, we also anticipate that such an event would
receive regulatory scrutiny at both the Federal and State level. We are unable to quantify the potential impact of such cyber security
threats or subsequent related actions. These potential cyber security incidents and corresponding regulatory action could result in a
material decrease in revenues and may cause significant additional costs (e.g., penalties, third party claims, repairs, insurance or
compliance) and potentially disrupt our supply and markets for natural gas, oil and other fuels.
We maintain security measures designed to protect our information technology systems, network infrastructure and other assets.
However, these assets and the information they process may be vulnerable to cyber security incidents, including the resulting
disability, or failures of assets or unauthorized access to assets or information. If our technology systems were to fail or be breached,
or those of our third-party service providers, we may be unable to fulfill critical business functions, including effectively maintaining
certain internal controls over financial reporting. We are unable to quantify the potential impact of cyber security incidents on our
business.
Rising energy prices could negatively impact our business.
Higher fuel costs could significantly impact our results of operations if requests for recovery are unsuccessful. In addition, higher fuel
costs could reduce customer demand and/or increase bad debt expense, which could also have a material impact on our results of
operations. Delays in the timing of the collection of fuel cost recoveries as compared with expenditures for fuel purchases could have
an impact on our cash flows. We are unable to predict future prices or the ultimate impact of such prices on our results of operations
or cash flows.
Our operating results may fluctuate on a seasonal and quarterly basis and can be adversely affected by milder weather.
Our electric and natural gas utility businesses are seasonal, and weather patterns can have a material impact on our operating
performance. Demand for electricity is often greater in the summer and winter months associated with cooling and heating. Because
natural gas is heavily used for residential and commercial heating, the demand for this product depends heavily upon weather patterns
throughout our service territory, and a significant amount of natural gas revenues are recognized in the first and fourth quarters related
to the heating season. Accordingly, our operations have historically generated less revenues and income when weather conditions are
milder in the winter and cooler in the summer. Unusually mild winters and summers could have an adverse effect on our financial
condition, results of operations, or cash flows.