Eversource 2012 Annual Report Download - page 33

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(approximately $414 million at CL&P) for estimated restoration costs as regulatory assets as of December 31, 2012, subject to future
recovery from customers. If, upon review, any of our state regulatory authorities finds that our actions were imprudent, some of those
restoration costs may not be recoverable from customers. The inability to recover a significant amount of such costs could have an
adverse effect on our financial position, results of operations and cash flows.
NU and its utility subsidiaries are exposed to significant reputational risks, which make them vulnerable to increased
regulatory oversight or other sanctions.
Because utility companies, including our electric and natural gas utility subsidiaries, have large consumer customer bases, they are
subject to adverse publicity focused on the reliability of their distribution services and the speed with which they are able to respond to
electric outages, natural gas leaks and similar interruptions caused by storm damage or other unanticipated events. Adverse publicity
of this nature could harm the reputations of NU and its subsidiaries, and may make state legislatures, utility commissions and other
regulatory authorities less likely to view NU and its subsidiaries in a favorable light, and may cause NU and its subsidiaries to be subject
to less favorable legislative and regulatory outcomes or increased regulatory oversight. Unfavorable regulatory outcomes can include
more stringent laws and regulations governing our operations, such as reliability and customer service quality standards or vegetation
management requirements, as well as fines, penalties or other sanctions or requirements. The imposition of any of the foregoing could
have a material adverse effect on business, results of operations, cash flow and financial condition of NU and each of its utility
subsidiaries.
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 other matters. The commissions’ policies and regulatory actions could have a
material impact on the Regulated companies’ financial position, results of operations and cash flows.
Our transmission, distribution and generation systems may not operate as expected, and could require unplanned
expenditures, which could adversely affect our financial position, results of operations and cash flows.
Our ability to properly operate our transmission, distribution and generation systems is critical to the financial performance of our
business. Our transmission, distribution and generation businesses face several operational risks, including the breakdown or failure of
or damage to equipment or processes (especially due to age); labor disputes; disruptions in the delivery of electricity and natural gas,
including impacts on us or our customers; increased capital expenditure requirements, including those due to environmental regulation;
information security risk, such as a breach of our systems on which sensitive utility customer data and account information are stored;
catastrophic events such as fires, explosions, or other similar occurrences; extreme weather conditions beyond equipment and plant
design capacity; other unanticipated operations and maintenance expenses and liabilities; and potential claims for property damage or
personal injuries beyond the scope of our insurance coverage. The failure of our transmission, distribution and generation systems to
operate as planned may result in increased capital costs, reduced earnings or unplanned increases in operation and maintenance
costs. At PSNH, outages at generating stations may be deemed imprudent by the NHPUC resulting in disallowance of replacement
power costs. Such costs that are not recoverable from our customers would have an adverse effect on our financial position, results of
operations and cash flows.
Limits on our access to and increases in the cost of 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. In addition, higher interest rates would increase our cost of borrowing, which could
adversely impact our results of operations. A downgrade of our credit ratings or events beyond our control, such as a disruption in
global capital and credit markets, 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 or may elect to exercise their termination rights, which could
adversely affect our earnings.
We are exposed to the risk that counterparties to various arrangements who owe us money, have contracted to supply us with energy,
coal, or other commodities or services, or who work with us as strategic partners, including on significant capital projects, will not be
able to perform their obligations, will terminate such arrangements or, with respect to our credit facilities, fail to honor their
commitments. Should any of these counterparties fail to perform their obligations or terminate such arrangements, we might be forced
to replace the underlying commitment at higher market prices and/or have to delay the completion of, or cancel 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.