Eversource 2015 Annual Report Download - page 29

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additional regulatory considerations, and potential delay with respect to future transmission projects, which may adversely affect our results of
operation.
There is no assurance that the commissions will approve the recovery of all costs incurred by our electric and gas companies, including costs for
construction, operation and maintenance, as well as a reasonable return on their respective regulated assets. The amount of costs incurred by the
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.
If our settlement agreement regarding the divestiture of our generation assets in New Hampshire is not approved, it could have a material
adverse effect on our earnings.
Under our settlement agreement for the divestiture of our generation assets in New Hampshire, we will be entitled to collect from customers an
amount equal to the difference between the proceeds from the sale of these assets and the undepreciated book value of those assets. Costs related to
the divestiture would also be recoverable. To minimize the financial impact on customers in New Hampshire, the legislature passed legislation that
allows for the securitization of stranded costs to be recovered. If the NHPUC does not approve the settlement, we may not be able to fully recover
these costs in future rate proceedings, which could have a material adverse effect on our 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, failure of, or damage to operating
equipment, information technology systems, 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;
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. Many of our transmission projects are expected to alleviate identified reliability issues and reduce customers’ costs.
However, if the in-service date for one or more of these projects is delayed due to economic events or factors, or regulatory or other delays, the risk
of failures in the electricity transmission system may increase. Any 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. Outages at generating
stations may be deemed imprudent by the NHPUC resulting in disallowance of replacement power and repair 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.
Increases in electric and gas prices and/or a weak economy can lead to changes in legislative and regulatory policy promoting increased
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 natural gas sales in our service territories. Economic downturns or periods of high energy supply costs can
also impact customers’ ability to pay their energy bills, resulting in increased bad debt expense. If energy use were to decline or bad debt expense
were to increase, without corresponding adjustments in rates at our electric and gas companies that do not currently have revenue decoupling, then
our revenues would be reduced, which would have an adverse effect on our financial position, results of operations and cash flows.
Severe storms could cause significant damage to any of our facilities requiring extensive expenditures, the recovery for which is subject to
approval by regulators.
Severe weather, such as ice and snow storms, hurricanes and other natural disasters, may cause outages and property damage, which may require us
to incur additional costs that may not be recoverable from customers. The cost of repairing damage to our operating subsidiaries’ facilities and the
potential disruption of their operations due to storms, natural disasters or other catastrophic events could be substantial, particularly as regulators and
customers demand better and quicker response times to outages. 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.
Our goodwill is valued and recorded at an amount that, if impaired and written down, could adversely affect our future operating results
and total capitalization.
We have a significant amount of goodwill on our consolidated balance sheet. As of December 31, 2015, goodwill totaled $3.5 billion. The carrying
value of goodwill represents the fair value of an acquired business in excess of identifiable assets and liabilities as of the acquisition date. We test
our goodwill balances for impairment on an annual basis or whenever events occur or circumstances change that would indicate a potential for
impairment. A determination that goodwill is deemed to be impaired would result in a non-cash charge that could materially adversely affect our
financial position, results of operations and total capitalization. The annual goodwill impairment test in 2015 resulted in a conclusion that our
goodwill is not impaired.