Eversource 2013 Annual Report Download - page 33

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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.
Changes in regulatory and/or legislative policy could negatively impact our transmission planning and 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 a FERC approved formula found in the transmission tariff. All New
England transmission owners' agreement to this regional cost allocation is set forth in the Transmission Operating Agreement. This
agreement can be modified with the approval of a majority of the transmission owning utilities and approval by 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 has issued rules requiring all regional transmission organizations and transmission owning utilities to make compliance changes
to their tariffs and contracts in order to further encourage the construction of transmission for generation, including renewable
generation. This compliance will require ISO-NE and New England transmission owners to develop methodologies that allow for
regional planning and cost allocation for transmission projects chosen in the regional plan that are designed to meet public policy goals
such as reducing greenhouse gas emissions or encouraging renewable generation. Such compliance may also allow non-incumbent
utilities and other entities to participate in the planning and construction of new projects in our service area and regionally.
Changes in the Transmission Operating Agreement, the New England Transmission Tariff or legislative policy, or implementation of
these new FERC planning rules, could adversely affect our transmission planning, our earnings and our prospects for growth.
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. The amount of costs incurred by the Regulated companies, 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, NSTAR Electric 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, NSTAR Electric and WMECO receive approval to recover the costs of
these contracts from the PURA 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.