1

Agenda

•  Natural gas and power markets overview

•  Generation retirements and in developments

•  Future resource mix including large hydro

•  Balancing environmental, reliability and cost impacts

2

Northeast Utilities

Electric Customers: 3M

Gas Customers: 0.5M

Utilities:

•  CT Light & Power

•  NSTAR Electric

•  Public Service NH

•  Western MA Electric

•  NSTAR Gas

•  Yankee Gas

3

Natural Gas: Shale gas keeping a lid on wellhead prices

•  U.S. Shale Gas Production up ~500% in last 5 years, 40% of US dry gas production

4 Source: EIA

•  Divergence in gas and oil prices makes fuel switching attractive, demand growth seen in industrial and large commercial segments.

Natural Gas: Increased Supply, Lower Prices

5

Constrained Natural Gas Market

•  Increased demand and constrained pipelines led to surge in prices and volatility during 2012/13 winter

•  Similar pattern in place for 2013/14 winter

New England Spot Prices

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

11/1

/201

2

12/1

/201

2

1/1/

2013

2/1/

2013

3/1/

2013

4/1/

2013

5/1/

2013

6/1/

2013

7/1/

2013

8/1/

2013

9/1/

2013

10/1

/201

3

11/1

/201

3

12/1

/201

3

1/1/

2014

Nat

ura

l Gas

($/

MM

Btu

)

$-

$50.00

$100.00

$150.00

$200.00

$250.00

Wh

ole

sale

Po

wer

($/

MW

h)

AGT Citygate ISO-NE Hub

6

Constrained Natural Gas Market

•  New England diverges sharply from North American natural gas market in winter

2014 Natural Gas Futures

$-

$5.00

$10.00

$15.00

$20.00

$25.00

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

$/M

MB

tu

Henry Hub AGT CitygateSource: Bloomberg, 12/28/13

7

4Q2013 Run-Up in Natural Gas & Power

2014 Winter NG Prices (Jan-Mar)

$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

$20.00

9/3

9/17

10/1

10/15

10/29

11/12

11/26

12/10

12/24

$/M

MB

tu

Henry Hub AGT Citygate

Source: Bloomberg, 12/28/13

New England Wholesale Power Futures (All-hours, Annual, 2014)

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

9/3

9/17

10/1

10/15

10/29

11/12

11/26

12/10

12/24

$/M

Wh

ISO-NE Hub

•  Futures rose sharply in advance of latest winter season

8

New England Gas Pipeline Expansion

•  Three of five major pipelines serving New England have proposed incremental capacity into the region but most expansions have been to the West

9

Northeast Pipeline Expansions

•  Approx. 1 BCFD incremental capacity to New York went into service on November 1, 2013 but none into New England yet

10

Boston Vs. New York

•  Historical prices => daily settlement average, 2013-14W => ICE Forward Financial Basis

11

Global LNG Pricing

•  Global LNG prices continue to maintain significant premiums to U.S. – limiting imports to supply gas from East in New England

Source: FERC

12

Power Generation “Dash to Gas”

0.0%

0.0%

5.1%

7.6%

22.3%

18.3%

14.9%

31.7%

Wind

Other

Hydro

Biomass

Oil

Coal

Natural Gas

Nuclear

1.0%

0.3%

5.8%

5.4%

0.2%

3.2%

31.2%

52.8%

Wind

Other

Hydro

Biomass

Oil

Coal

Natural Gas

Nuclear

2000 2012 New England Generation Mix (MWH)

Source: ISO-NE, Net Energy by Source

13 Source: ISO-NE

Power Generation Retirements and Additions

40.7%

0.2%

1.3%

4.2%

53.6%

Wind

Solar

Hydro

Biomass

NaturalGas

Potential Retirements Proposed Capacity

•  ISO has identified 8,300 MW at risk (Dec. 2012 Study)

•  Vermont Yankee (640 MW) and Brayton Point (1,500) retiring

•  6,300 MW needed to be replaced plus 2,889 MW of EE/DR by 2020

14

NE Generation Mix in Play

Press Releases: June 17, 2013 – Massachusetts, Connecticut, Maine, Rhode Island and

Vermont, have launched a regional initiative to expand large hydro imports into New England

December 5, 2013 - New England Governors Sign Energy Statement Committing Region to Cooperation on Infrastructure: Large hydro imports, renewable, CHP and natural gas

•  Role of hydro power and natural gas is being hotly debated in New

England

•  Little agreement on how to finance these resources •  Lack of long term buyers for power since deregulation •  Generators unwilling to contract long term for gas transportation •  State mandates driving renewable generation – mostly wind and

solar

15

Demand for Renewables & Reliability

 9,000

 11,000

 13,000

 15,000

 17,000

 19,000

 21,000

 23,000

2014 2015 2016 2017 2018 2019 2020 2021 2022

Total  Sup

ply  R

equired  (GWHr)

Total  NE  Class  I  Demand  (GWHr) Existing  NE  Class  I  Supply  (2013)

State  Share  of  2022  Total  Renewable  Demand

CTMassRIMaineNH

Illustrative Example (by Technology) of Resources Needed to Fill Gap

Nameplate (MW)

Capacity Factor

Generation Output

Onshore Wind 3191 32% 9 Twhr

Offshore Wind 2760 37% 9 Twhr

Solar 7856 13% 9 Twhr

Northern Pass 1200 85% 9 Twhr

Estimated Annual New England RPS Compliance Costs (2022): - Annual Total Demand (19 TWhr) X ACP / Cost per MWhr ($55/REC) = $1 Billion

Gap of 9 TWhr

16

Renewable Interconnection Queue

850 MW

730 MW 165

MW

50MW

50MW

60MW

20 MW

468MW

1,200 MW

1,200+ MW

Wind

Hydro

Solar/DG

•  Majority of large scale renewable resources located in Northern NE

•  Solar and other DG built closer to load centers with additional subsidies

•  NU share long terms PPAs •  MA GCA I, 150 MW, 4

wind farms •  MA GCA II, 400 MW, 7

wind farms •  CT PA 13-303, 225 MW

wind/solar •  CT LREC/ZREC,

$0.8Bn, 200 MW •  NH 75 MW biomass

250 MW

17

Northern Pass Transmission

•  1200 MW HVDC link between Quebec and Deerfield, NH •  HQ funded project – no

cost to NE ratepayers •  Constructed by NU •  In service 2017 •  Interconnection approved

by ISO-NE •  Benefits

•  Lowers NE costs by $150M - $200M/Yr

•  Reduced carbon emissions by circa 5M Tons/Yr

•  Clean, non gas supply backed by vast hydro resources

•  Compliments wind and solar integration

18

New Resource Alternatives for New England

•  Search is on for the right balance in resource mix to reliably serve future energy needs

Natural Gas

Large Hydro

Solar/DG

Wind

Energy Efficiency

Rel

iabi

lity

Environment

Cost