Eversource 2010 Annual Report Download - page 32

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have to delay the completion of a capital project. Should any lenders under our credit facilities fail to perform, the level of borrowing
capacity under those arrangements could decrease. In any such events, our financial position, results of operations, or cash flows
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.
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 transmission projects requires extensive permitting, design and technical activities. Various
factors could result in increased costs and delay construction schedules. 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 costs have been and will be prudently incurred, we cannot predict the outcome of future reviews should they occur.
In addition, our transmission projects may be delayed or displaced by new generation facilities, which could result in reduced
transmission capital investments, reduced earnings, and limited future growth prospects.
Many of our transmission projects are expected to help alleviate identified reliability issues and reduce customers' costs. However, if,
due to further regulatory or other delays, the in-service date for one or more of these projects is delayed, there may be increased risk of
failures in the electricity transmission system and supply interruptions or blackouts, which could have an adverse effect on our earnings.
The FERC has followed a policy of providing incentives designed to encourage the construction of new transmission facilities, including
higher returns on equity and allowing facilities under construction to be placed in rate base. Our projected earnings and growth could be
adversely affected were FERC to reduce these incentives in the future below the level presently anticipated.
Increases in electric and gas prices and/or a weak economy, can lead to changes in legislative and regulatory policy
promoting energy efficiency, conservation, and self-generation and/or a reduction in our customers’ ability to pay their bills,
which may adversely impact our business.
Energy consumption is significantly impacted by the general level of economic activity and cost of energy supply. Economic downturns
or periods of high energy supply costs typically can lead to the development of legislative and regulatory policy designed to promote
reductions in energy consumption and increased energy efficiency and self-generation by customers. This focus on conservation,
energy efficiency and self-generation may result in a decline in electricity and gas sales in our service territories. If any such declines
were to occur without corresponding adjustments in rates, then our revenues would be reduced and our future growth prospects would
be limited.
In addition, a period of prolonged economic weakness could impact customers’ ability to pay bills in a timely manner and increase
customer bankruptcies, which may lead to increased bad debt expenses or other adverse effects on our financial position, results of
operations or cash flows.
Connecticut, New Hampshire and Massachusetts have each investigated revenue decoupling as a mechanism to align the interests of
customers and utilities relative to conservation. In Connecticut, the DPUC authorized decoupling through a rate design that is intended
to recover greater distribution revenue through fixed charges, and proportionately less distribution revenue through usage-based
charges. In New Hampshire, the NHPUC conducted a decoupling docket and determined that utilities were free to propose decoupling
in the context of a rate case and demonstrate the effect decoupling would have on its risk profile and ROE. PSNH has not yet
commenced such a proceeding. In Massachusetts, the DPU has required WMECO to adopt full decoupling in its January 31, 2011 rate
decision. At this time it is uncertain what impact these decoupling mechanisms will have on our companies.
As a way to promote self-generation and reduce energy costs, Connecticut, Massachusetts, and New Hampshire have taken a greater
interest in allowing customers to receive credit for generation produced at a customer-owned generating facility that exceeds their
energy needs. In Massachusetts, in accordance with the Green Communities Act, the DPU adopted rules and regulations concerning
net metering that will have this effect. Such rules provide a cost recovery mechanism for affected utilities to recover lost revenues. The
Massachusetts DPU is expected to hold further proceedings to address net metering in early 2011. In Connecticut, the DPUC opened
a docket to review existing state statutes and determine what limitations currently exist in state law concerning net metering. In
addition, any legislation in Connecticut to promote self-generation and net metering could impact CL&P’s financial position, results of
operations or cash flows. In New Hampshire, new legislation dramatically changed the net metering rules in 2010. This new legislation
is meant to encourage net metering from customers with small generators and also provides PSNH a cost recovery mechanism for lost
distribution revenue.