Eversource 2015 Annual Report Download - page 28

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constitute a part of this Annual Report on Form 10-K. Printed copies of these reports may be obtained free of charge by writing to our Investor
Relations Department at Eversource Energy, 107 Selden Street, Berlin, CT 06037.
Item 1A. Risk Factors
In addition to the matters set forth under “Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995” included immediately
prior to Item 1, Business, above, we are subject to a variety of significant risks. Our susceptibility to certain risks, including those discussed in detail
below, could exacerbate other risks. These risk factors should be considered carefully in evaluating our risk profile.
Cyber breaches, acts of war or terrorism, or grid disturbances could negatively impact our business.
Cyber breaches, acts of war or terrorism, physical attacks or grid disturbances resulting from internal or external sources could target our
transmission, distribution and generation facilities or our information technology systems. Such actions could impair our ability to manage these
facilities, operate our systems effectively, or properly manage our data, networks and programs, resulting in loss of service to customers.
We have instituted safeguards to protect our operational systems and information technology assets. We devote substantial resources to network and
application security, encryption and other measures to protect our computer systems and infrastructure from unauthorized access or misuse and
interface with numerous external entities to improve our cybersecurity situational awareness. FERC, through the North American Electric Reliability
Corporation, requires certain safeguards to be implemented to deter cyber and/or physical attacks. These safeguards may not always be effective due
to the evolving nature of cyber and/or physical attacks.
Because our generation and transmission facilities are part of an interconnected regional grid, we face the risk of blackout due to a disruption on a
neighboring interconnected system.
Any such cyber breaches, acts of war or terrorism, physical attacks or grid disturbances could result in a significant decrease in revenues, significant
expense to repair system damage or security breaches, and liability claims, which could have a material adverse impact on our financial position,
results of operations or cash flows.
Strategic development opportunities in both electric and natural gas transmission may not be successful and projects may not commence
operation as scheduled or be completed, which could have a material adverse effect on our business prospects.
We are pursuing broader strategic development investment opportunities that will benefit the New England region related to the construction of
electric and natural gas transmission facilities, interconnections to generating resources and other investment opportunities. The development,
construction and expansion of electric transmission and natural gas transmission facilities involve numerous risks. Various factors could result in
increased costs or result in delays or cancellation of these projects. Risks include regulatory approval processes, new legislation, economic events or
factors, environmental and community concerns, design and siting issues, difficulties in obtaining required rights of way, competition from
incumbent utilities and other entities, and actions of strategic partners. Should any of these factors result in such delays or cancellations, our financial
position, results of operations, and cash flows could be adversely affected or our future growth opportunities may not be realized as anticipated.
As a result of legislative and regulatory changes during 2015, the states in which we provide service have implemented new procedures to select for
construction new major electric transmission and gas pipeline facilities. These procedures require the review of competing projects and permit the
selection of only those projects that are expected to provide the greatest benefit to customers. If the projects in which we have invested are not
selected for construction, it would have a material adverse effect on our future financial position, results of operations and cash flows.
The actions of regulators and legislators can significantly affect our earnings, liquidity and business activities.
The rates that our electric and gas companies charge their customers are determined by their state regulatory commissions and by FERC. These
commissions also regulate the companies’ accounting, operations, the issuance of certain securities and certain other matters. FERC also regulates
the transmission of electric energy, the sale of electric energy at wholesale, accounting, issuance of certain securities and certain other matters.
Under state and federal law, our electric and gas 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 regulatory commissions for review and approval.
The FERC has jurisdiction over our transmission costs recovery and the allowed return on equity. The ROE has been contested by outside parties as
unjust and unreasonable. Certain outside parties have filed three complaints against all electric companies under the jurisdiction of ISO-NE alleging
that the ROE is unjust and unreasonable. The first complaint, which was concluded in 2015, resulted in a decrease of the allowed ROE. The second
and third complaints are currently under review with the FERC. The FERC has initiated a review of the regional and local transmission rates due to a
lack of adequate transparency. FERC also found that the formula rates generally lacked sufficient details to determine how costs are derived and
recovered in rates.
A federal appeals court decision has upheld the FERC’s authority to order major changes to transmission planning and cost allocation in FERC Order
No. 1000 and Order No. 1000-A, including transmission planning for public policy needs, and the requirement that utilities remove from their
transmission tariffs their rights of first refusal to build transmission. Additionally, the FERC affirmed that it can eliminate our right of first refusal to
build transmission in New England even though the FERC previously approved and granted special protections to these rights. Implementation of
FERC’s goals in New England, including within our service territories, may expose us to competition for construction of transmission projects,