Xcel Energy 2015 Annual Report Download - page 58
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We attempt to mitigate the risk of regulatory penalties through formal training on such prohibited practices and a compliance function
that reviews our interaction with the markets under FERC and CFTC jurisdictions. However, there is no guarantee our compliance
program will be sufficient to ensure against violations.
Macroeconomic Risks
Economic conditions impact our business.
Our operations are affected by local, national and worldwide economic conditions. Growth in our customer base is correlated with
economic conditions. While the number of customers is growing, sales growth is relatively modest due to an increased focus on
energy efficiency including federal standards for appliance and lighting efficiency and distributed generation, primarily solar PV.
Instability in the financial markets also may affect the cost of capital and our ability to raise capital, which is discussed in the capital
market risk section above.
Economic conditions may be impacted by insufficient financial sector liquidity leading to potential increased unemployment, which
may impact customers’ ability to pay timely, increase customer bankruptcies, and may lead to increased bad debt.
Further, worldwide economic activity has an impact on the demand for basic commodities needed for utility infrastructure, such as
steel, copper, aluminum, etc., which may impact our ability to acquire sufficient supplies. Additionally, the cost of those commodities
may be higher than expected.
Our operations could be impacted by war, acts of terrorism, threats of terrorism or disruptions in normal operating conditions due
to localized or regional events.
Our generation plants, fuel storage facilities, transmission and distribution facilities and information systems may be targets of terrorist
activities. Any such disruption could result in a decrease in revenues and additional costs to repair and insure our assets. These
disruptions could have a material impact on our financial condition and results of operations. The potential for terrorism has subjected
our operations to increased risks and could have a material effect on our business. We have already incurred increased costs for
security and capital expenditures in response to these risks. In addition, we may experience additional capital and operating costs to
implement security for our plants, including our nuclear power plants under the NRC’s design basis threat requirements. We have also
already incurred increased costs for compliance with NERC reliability standards associated with critical infrastructure protection. In
addition, we may experience additional capital and operating costs to comply with the NERC critical infrastructure protection
standards as they are implemented and clarified.
The insurance industry has also been affected by these events and the availability of insurance may decrease. In addition, the
insurance we are able to obtain may have higher deductibles, higher premiums and more restrictive policy terms.
A disruption of the regional electric transmission grid, interstate natural gas pipeline infrastructure or other fuel sources, could
negatively impact our business. Because our generation, the transmission systems and local natural gas distribution companies are
part of an interconnected system, we face the risk of possible loss of business due to a disruption caused by the actions of a
neighboring utility or an event (severe storm, severe temperature extremes, generator or transmission facility outage, pipeline rupture,
railroad disruption, sudden and significant increase or decrease in wind generation or any disruption of work force such as may be
caused by flu or other epidemic) within our operating systems or on a neighboring system. Any such disruption could result in a
significant decrease in revenues and significant additional costs to repair assets, which could have a material impact on our financial
condition and results.
The degree to which we are able to maintain day-to-day operations in response to unforeseen events will in part determine the
financial impact of certain events on our financial condition and results. It is difficult to predict the magnitude of such events and
associated impacts.
A cyber incident or cyber security breach could have a material effect on our business.
We operate in an industry that requires the continued operation of sophisticated information technology systems and network
infrastructure. In addition, we use our systems and infrastructure to create, collect, use, disclose, store, dispose of and otherwise
process sensitive information, including company data, customer energy usage data, and personal information regarding customers,
employees and their dependents, contractors, shareholders and other individuals.