Eversource 2010 Annual Report Download - page 33

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Changes in regulatory and/or legislative policy could negatively impact regional transmission cost allocation rules.
The existing FERC-approved New England transmission tariff allocates the costs of transmission facilities that provide regional benefits
to all customers of participating transmission-owning utilities. As new investment in regional transmission infrastructure occurs in any
one state, its cost is shared across New England in accordance with relative benefits received. This regional cost allocation is set forth
in the Transmission Operating Agreement signed by all of the New England transmission owning utilities. Effective February 1, 2010,
this agreement can be modified with the approval of a majority of the transmission owning utilities and FERC. In addition, other parties,
such as state regulators, may seek certain changes to the regional cost allocation formula, which could have adverse effects on the
rates our distribution companies charge their retail customers. FERC is also considering policies to encourage the construction of
transmission for renewable generation that could have the effect of imposing costs of inter-regional investment on New England
customers.
Changes in regulatory or legislative policy or unfavorable outcomes in regulatory proceedings could jeopardize our full
and/or timely recovery of costs incurred by our regulated distribution and generation businesses.
Under state law, our Regulated companies are entitled to charge rates that are sufficient to allow them an opportunity to recover their
reasonable operating and capital costs, to attract needed capital and maintain their financial integrity, while also protecting relevant
public interests. Each of these companies prepares and submits periodic rate filings with their respective state regulatory commissions
for review and approval. There is no assurance that these state commissions will approve the recovery of all such costs incurred by our
Regulated companies, such as for construction, operation and maintenance, as well as a return on investment on their respective
regulated assets. Increases in these costs, coupled with increases in fuel and energy prices could lead to consumer or regulatory
resistance to the timely recovery of such costs, thereby adversely affecting our financial position, results of operations or cash flows.
Additionally, state legislators may enact laws that significantly impact our Regulated companies’ revenues, including by mandating
electric or gas rate relief and/or by requiring surcharges to customer bills to support state programs not related to the utilities or energy
policy. Such increases could pressure overall rates to our customers and our routine requests to regulators for rate relief.
In addition, CL&P and WMECO procure energy for a substantial portion of their customers’ needs via requests for proposal on an
annual, semi-annual or quarterly basis. CL&P and WMECO receive approval to recover the costs of these contracts from the DPUC
and DPU, respectively. While both regulatory agencies have consistently approved the solicitation processes, results and recovery of
costs, management cannot predict the outcome of future solicitation efforts or the regulatory proceedings related thereto.
PSNH meets most of its energy requirements through its own generation resources and fixed-price forward purchase contracts.
PSNH’s remaining energy needs are met primarily through spot market purchases. Unplanned forced outages of its generating plants
could increase the level of energy purchases needed by PSNH and therefore increase the market risk associated with procuring the
energy to meet its requirements. PSNH recovers these costs through its ES rate, subject to a prudence review by the NHPUC. We
cannot predict the outcome of future regulatory proceedings related to recovery of these costs.
Migration of customers from PSNH energy service to competitive energy suppliers could increase the cost to the remaining
customers of energy produced by PSNH generation assets and decrease our revenues.
PSNH’s ES rates have been higher than competitive energy prices offered to some customers in recent years, primarily due to lower
natural gas prices. As a result, by the end of 2010, approximately 2 percent of PSNH’s retail customers (representing approximately 32
percent of load), mostly large commercial and industrial customers, were buying their energy from competitive suppliers rather than
from PSNH. The remaining retail customers are experiencing an increase in the cost of energy service supplied by PSNH by 5 percent
to 7 percent due to migration of large commercial and industrial customers and the lower base in which to recover PSNH's fixed
generation costs. This increase may in turn cause further migration and further increasing of PSNH energy service rates. This trend
could lead to PSNH continuing to lose retail 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.
The NHPUC is examining this issue in a proceeding in which hearings ended on December 1, 2010. PSNH has suggested transferring
some fixed costs of the generation facilities into a nonbypassable charge while intervening competitive suppliers have proposed taking
over the purchased power portion of the load not supplied by PSNH’s generation. Others have also proposed having PSNH bid all of
its generation facilities into the market while an RFP process supplies all of the power for PSNH’s energy service. The NHPUC is
considering further proceedings to explore these and other issues as well as the NHPUC authority to require PSNH to divest its
generation facilities. It is not known what the results of such a proceeding would be, what PSNH may realize as a result of the sale or
retirement of one or more of its generation facilities, or to what extent or manner the NHPUC would provide for recovery of any
investment in its generation facilities.
Judicial or regulatory proceedings or changes in regulatory or legislative policy could jeopardize completion of, or full
recovery of costs incurred by PSNH in constructing, the Clean Air Project.
Pursuant to New Hampshire law, PSNH is building the Clean Air Project at its Merrimack Station in Bow, New Hampshire. Several
parties initiated legal proceedings challenging the project. These proceedings, or new legislation, regulations or judicial or regulatory
interpretations of applicable law or regulations could result in increased costs to the project.
In addition, PSNH’s investment in the project after it is completed is subject to prudence review by the NHPUC at the time the project is
placed in service. A material prudence disallowance could adversely affect PSNH’s financial position, results of operations or cash