ES

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How ES rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

37%

of sentences unchanged

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new sentences

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Length

−96

words, now 6,022

New in FY2025

Cybersecurity Risks: Cyber events, including acts of war or terrorism, targeted directly on or indirectly affecting our systems or the systems of third parties on which we rely, could severely impair operations, negatively impact our business, lead to the disclosure of confidential information and adversely affect our reputation.
Cyberattacks that seek to exploit potential vulnerabilities in the utility industry and seek to disrupt electric, natural gas and water transmission and distribution systems are increasing in sophistication including artificial intelligence, magnitude and frequency.
In addition to intentional attacks, we also face risks from other cybersecurity events, such as software defects, misconfigurations, system integration failures and problematic third-party software or firmware updates that can cause widespread outages or disruptions even in the absence of a deliberate attack.
A successful cyberattack or other significant cyber event affecting technology systems that control our transmission, distribution, natural gas and water systems or other assets could impair or prevent us from managing these systems and facilities, operating our systems effectively, or properly managing our data, networks and programs.
The breach or failure of certain information or operational technology systems could adversely affect our ability to correctly record, process and report financial information.
A major cyber event could result in significant expenses to investigate and to repair system damage or security breaches and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and damage to our reputation.
We have instituted safeguards to protect our technology systems and assets; however, we cannot guarantee that our security efforts will prevent or deter cyberattacks.
We deploy substantial technologies to system and application security, encryption and other measures to protect our computer systems and infrastructure from unauthorized access or misuse and to detect and respond to cyber events.
We maintain cyber insurance to cover damages, potential ransom and defense costs related to breaches of network or operational technology, but it may be insufficient in limits and coverage exclusions to cover all losses.
We employ system controls to prevent the dissemination of certain confidential information and train employees on phishing risks.
We are increasingly integrating artificial intelligence (AI) into our operations, and while these technologies offer operational benefits, they also introduce significant risks that could adversely impact our business and results of operations.
We deploy AI tools and models in areas such as weather forecasting, grid planning, asset management, customer service and internal support functions.
This deployment is overseen by an internal governance and oversight committee, which has established policies and procedures and reviews and approves the use of AI throughout the organization.
AI systems may produce inaccurate, biased or otherwise unreliable forecasts or recommendations due to flawed algorithms, limited training data or unforeseen conditions which could result in service disruptions, regulatory penalties and reputational harm.
Evolving AI regulations may impose new compliance and reporting obligations or restrict usage and stakeholders may raise concerns about transparency, bias, and accountability.
Despite implementing a governance framework and policies and controls in place related to AI use, including human oversight of critical decisions and outputs, these risks could negatively affect operations, expose us to litigation or regulatory penalties or fines, increase costs and impair our ability to meet customer expectations, which could have a material adverse impact on our financial position, results of operations, and cash flows.
Rate Regulation, Cost Recovery and Affordability Our electric, natural gas, and water utility companies are subject to regulation by federal and state agencies and each is required to engage in regulatory approval proceedings as a part of the process of establishing the terms and rates for service.
Our regulated companies are entitled to charge rates that are sufficient to recover prudently incurred costs and a reasonable return on investment on invested capital.
Regulatory decisions may require us to cancel, delay, or reduce planned investments or incur costs we cannot recover.
Rates are subject to prudency reviews, refunds or disallowances and may not align with the timing of costs incurred.
Adverse outcomes, including reductions in allowed rate of return, disallowance of costs or delays in rate adjustment, could adversely affect our financial position, results of operations and cash flows.
Customer affordability concerns, driven by volatility in energy supply costs, evolving public policy mandates and inflationary pressures, may limit our ability to recover costs or fund infrastructure upgrades.
Regulators may respond by imposing stricter cost recovery standards, delaying or denying rate increases or cost recovery or requiring alternative funding mechanisms increasing financial uncertainty.
Heightened political and public scrutiny of rate-setting processes may also lead to additional compliance obligations or reputational risk.
These factors could adversely affect our financial position, results of operations and cash flows.
State-Level Risks State commissions regulate rates, operations, accounting and certain financing activities.
Rates are set in comprehensive base rate proceedings based on an analysis of invested capital, expenses and other factors, subject to periodic review and adjustments.
Regulatory proceedings typically involve multiple parties who have differing concerns and can challenge our current or future rates, and these proceedings can be contentious, lengthy, and subject to appeal.
Regulatory commissions may challenge the reasonableness or prudency of operating expenses (including storm restoration costs) incurred or capital investments made by our regulated operating companies and deny the full recovery of cost of service in rates.
Established rates are subject to subsequent prudency reviews by state regulators, whereby various portions of rates could be adjusted, subject to refund or disallowed, including cost recovery mechanisms.
We have incurred significant storm restoration costs that are not yet approved by the regulatory commissions, and though we believe those costs were prudently incurred, it is possible that some amount may be disallowed.
Regulators may also impose penalties or reduce allowed returns, which would adversely affect our financial condition.
Additionally, catastrophic events at other utilities could lead to new requirements that increase costs.
We continue to monitor the evolving regulatory environment in Connecticut, including changes in the composition of PURA, which may affect our electric, natural gas and water businesses in that state.
Regulatory approval is also required for certain dispositions of property and plant, mergers and consolidations and issuances of long-term securities, and construction and operation of facilities.
Failure to obtain required approvals on a timely basis, or at all, could result in increased costs, the postponement or cancellation of planned transactions or projects, changes in financing strategies, and an adverse effect on our financial condition, results of operations, and ability to implement our business strategy.
Federal-Level Risks The FERC has jurisdiction over our transmission cost recovery and our allowed ROEs on transmission investments.
If FERC changes its methodology on developing ROEs or eliminates certain transmission incentives, it could negatively impact our financial position, results of operations and cash flows.
From time to time, various matters are pending before FERC relating to transmission rates, incentives, interconnections and transmission planning.
Depending on the outcome, any of these matters could materially impact our results of operations and financial condition.

and 51 more.

Gone since FY2024

Cybersecurity Threats and Attacks: Cyberattacks, including acts of war or terrorism, targeted directly on or indirectly affecting our systems or the systems of third parties on which we rely, could severely impair operations, negatively impact our business, lead to the disclosure of confidential information and adversely affect our reputation.
Cyberattacks that seek to exploit potential vulnerabilities in the utility industry and seek to disrupt electric, natural gas and water transmission and distribution systems are increasing in sophistication, magnitude and frequency.
A successful cyberattack on the information technology systems that control our transmission, distribution, natural gas and water systems or other assets could impair or prevent us from managing these systems and facilities, operating our systems effectively, or properly managing our data, networks and programs.
The breach of certain information technology systems could adversely affect our ability to correctly record, process and report financial information.
A major cyber incident could result in significant expenses to investigate and to repair system damage or security breaches and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and damage to our reputation.
We have instituted safeguards to protect our information technology systems and assets.
We deploy substantial technologies to system and application security, encryption and other measures to protect our computer systems and infrastructure from unauthorized access or misuse.
We maintain cyber insurance to cover damages, potential ransom and defense costs related to breaches of networks or operational technology, but it may be insufficient in limits and coverage exclusions to cover all losses.
Any such cyberattacks could result in loss of service to customers and a significant decrease in revenues, which could have a material adverse impact on our financial position, results of operations, and cash flows.
We employ system controls to prevent the dissemination of certain confidential information and periodically train employees on phishing risks.
The rates that our electric, natural gas and water companies charge their customers are determined by their state regulatory commissions.
These commissions also regulate the companies' accounting, operations, the issuance of certain securities and certain other matters.
The FERC regulates the transmission of electric energy, the sale of electric energy at wholesale, accounting, issuance of certain securities and certain other matters, including reliability standards through the NERC.
The regulatory process may be adversely affected by the political, regulatory and economic environment in the states in which we operate.
Under state and federal law, our electric, natural gas and water companies are entitled to charge rates that are sufficient to allow them an opportunity to recover their prudently incurred operating and capital costs and a reasonable rate of return on invested capital, to attract needed capital and maintain their financial integrity, while also protecting relevant public interests.
Our electric, natural gas and water companies are required to engage in regulatory approval proceedings as a part of the process of establishing the terms and rates for their respective services.
Each of these companies prepares and submits periodic rate filings with their respective state regulatory commissions for review and approval, which allows for various entities to challenge our current or future rates, structures or mechanisms and could alter or limit the rates we are allowed to charge our customers.
These proceedings typically involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, who have differing concerns.
Any change in rates, including changes in allowed rate of return, are subject to regulatory approval proceedings that can be contentious, lengthy, and subject to appeal.
Established rates are also subject to subsequent prudency reviews by state regulators, whereby various portions of rates could be adjusted, subject to refund or disallowed, including cost recovery mechanisms.
The federal, state and local political and economic environment currently has, and may in the future have, an adverse effect on regulatory decisions with negative consequences for us.
These regulatory decisions currently, and may in the future, require us to cancel, reduce, or delay planned development activities or other planned capital expenditures or investments or otherwise incur costs that we may not be able to recover through rates.
There can be no assurance that regulators will approve the recovery of all costs incurred by our electric, natural gas and water companies, including costs for construction, operation and maintenance, and storm restoration.
The inability to recover a significant amount of operating costs in a timely manner or at all could have an adverse effect on our credit ratings, financial position, results of operations, and cash flows.
Changes to rates may occur at times different from when costs are incurred.
Additionally, catastrophic events at other utilities could result in our regulators and legislators imposing additional requirements that may lead to additional costs for the companies.
In addition to the risk of disallowance of incurred costs, regulators may also impose downward adjustments in a company’s allowed ROE as well as assess penalties and fines.
These actions would have an adverse effect on our credit ratings, financial position, results of operations, and cash flows.
We continue to experience challenges related to the regulatory environment in Connecticut with respect to our electric distribution, natural gas, and water businesses.
S&P recently downgraded the credit ratings of Eversource and its regulated utilities as a result of the challenging regulatory environment in Connecticut.
The FERC has jurisdiction over our transmission costs recovery and our allowed ROEs.
If FERC changes its methodology on developing ROEs, there could be a negative impact on our results of operations and cash flows.
Additionally, certain outside parties have filed four complaints against transmission-owning electric companies within ISO-NE alleging that our allowed ROEs are unjust and unreasonable.
The FERC also has jurisdiction over our transmission rate incentives such as the regional transmission organization (RTO) participation ROE incentive adder, CWIP in rate base incentive and the abandoned plant incentive.
If the FERC changes its policies regarding these incentives, there could be a negative impact on our financial position, results of operations, and cash flows.
Additionally, the FERC issued a Supplemental Notice of Proposed Rulemaking (NOPR) on Transmission Incentives that proposes to eliminate the existing RTO ROE incentive adder for utilities that have been participating in an RTO for more than three years.
A FERC decision approving this proposal could adversely affect our financial position, results of operations, and cash flows.
FERC's policy has encouraged competition for transmission projects, even within existing service territories of electric companies, as it looks to expand the transmission system to accommodate state and federal policy goals to utilize more renewable energy resources as well as to enhance reliability and resilience for extreme weather events.
Implementation of FERC's goals, including within our service territories, may expose us to competition for construction of transmission projects, additional regulatory considerations, and potential delay with respect to future transmission projects, which may adversely affect our results of operations and lower rate base growth.
Changes in tax laws, as well as the potential tax effects of business decisions could negatively impact our business, financial position, results of operations, and cash flows.

and 53 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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