Forward Capacity Market FCM CLP - CLM Update

1. Forward Capacity Market (FCM)CL&P - C&LM Update FCA#1 Auction Conducted Feb 04-06, 2008 – Results posted Feb 13th v FCA#2 – Qualification Packages due to ISO-NE nlt April 29, 2008 FCA#2 Auction Scheduled for Dec 01-04, 2008 ECMB Meeting Update 03-19-08 Ronald J. Araujo, Manager, CL&P, C&LM

2. What’s FCM? What are all these Acronyms?  FERC; ISO-NE; FCM; LICAP; FCA; DR; EE; DG; etc….

3. Why Does ISO-NE conduct Forward Capacity Market Auctions? Under FCM, ISO New England projects the needs of the power system three years in advance and then holds an annual auction (FCA) to purchase the power system resources that will satisfy the future regional requirements. ISO New England contracted with Power Auctions LLC to assist in running the first auction. The FCM auction is designed to: Attract new power system investment and maintain needed existing power resources; Eliminate the need for widespread reliability agreements, or contracts established outside the competitive market to ensure the continued operation of power plants needed for reliability. ISO New England, an independent, not-for-profit corporation, helps promote the health of New England’s economy and protect the well-being of its people by ensuring the constant availability of electricity, today and for future generations. ISO New England meets this obligation in three ways: - Reliably operating New England’s 32,000-MW bulk electric power generation and transmission system; - By overseeing & ensuring the fair administration of the region’s $10 billion wholesale electricity markets; - By managing comprehensive regional electric power planning.

4. Why Does CL&P-C&LM  Participate in FCM? Demonstrates leadership and commitment by deriving the full value of C&LM programs from available markets/funding sources. Current Revenue Source: FCM Transition Period: (12/01/06 – 05/31/10) ? $3.05/kW-month ?05/2008; $3.75/kW-month ?05/2009; $4.10/kW-month ?05/2010 Future Revenue Source: Full FCM Begins June 1, 2010 Future Capacity payments are determined by annual FCM auction results $4.25/kW-month = Floor for FCA#1 Conducted Feb 04-06, 2008 Note: RTEG Projects cleared below the floor at $2.92/kW-month Bottom Line: Additional FCM funding = greater C&LM performance opportunity

5. FCA#1 PROJECT QUALIFICATION PROCESS ISO-NE REQUIRES QUALIFICATION PACKAGES FOR ALL NEW PROJECTS New Capacity Entrants were required to prepare a “Qualification Package” for new projects identified by a “Show of Interest” (SOI) Submitted 02/28/07. v CL&P C&LM Submitted New Capacity Demand Resources Project Qualification Packages to ISO-NE for Independent Review on 06/15/07. v Qualification Packages Contained: FCM Team Effort * Project Description (Worksheet) * Demand Reduction Value Support Document * Customer Acquisition Plan * Funding Plan * Measurement and Verification Plan (M&V) * M&V Plan Supporting Documentation ISO-NE notified Proposers of acceptance status on Oct 02, 2007. v CL&P C&LM posted 1st installment of Financial Assurance on Oct 17, 2007. v First Auction Conducted by ISO-NE ?FCA#1: Feb 04?06, 2008. v Note: CL&P C&LM = “Price Taker” ISO-NE Notified FCA#1 Sponsors w/Results via MIS Report on Feb 13, 2008v

6. ISO-NE News Release, Holyoke, MA – February 13, 2008: FCA#1 Completed ISO New England’s First Forward Capacity Auction a Success: Auction Attracts Investment; Increases Role of Demand Resources, and Decreases Costly Reliability Agreements Wholesale Marketplace Helping to Achieve Long-term Power System Reliability Goals New England’s first Forward Capacity Market (FCM) auction, (FCA#1), has secured a blend of new and existing generation and demand-side resources to supply the 32,305 megawatts (MW) the six-state region will need in the 2010 to 2011 timeframe. The winning mix illustrates the market’s effectiveness in addressing future reliability needs by encouraging: New investment; Demand-side participation, and Maintenance of existing resources.

7. First Forward Capacity Market AuctionISO-NE FCA#1 (3-Days; Eight Rounds) ISO-NE Conducted FCA#1 February 04-06, 2008; Bidding in the first auction started at a price of $15.00 per kilowatt-month (kW-month) and systematically decreased through each successive round; Bidding in the eighth and final round reached the minimum price established for this auction, with excess supply in the amount of 2,047 MW remaining; The final clearing price for the entire New England region was $4.25 per kW-month; Following the auction, power plants eligible for out-of-market reliability compensation will decrease dramatically, falling from the current level of nearly 3,200 MW to, at most, 330 MW in the 2010 to 2011 timeframe.

8. Forward Capacity Market Auction Results ISO-NE FCA#1 Feb 04 – 06, 2008 (39,155 MW) Some 39,155 MW of resources from new and existing demand- and supply-side resources competed in the auction’s eight rounds, which ran from February 4 to 6, 2008. Notable highlights regarding the resource selections include the following: New Resource Results More than 1,813 MW of new supply and demand-side resources were selected as a part of the auction. New Resources represent new demand-side projects, such as energy efficiency, demand response, and distributed generation, and 626 MW represent new supply projects. New Resources are concentrated in areas of high electricity demand. - Massachusetts 757 MW; - Connecticut 592 MW; - Maine 170 MW; - Vermont 121 MW; - New Hampshire 74 MW; - Rhode Island 99 MW. Existing Resource Results - Existing power plants in New England fulfilled the largest share, accounting for 30,239 MW of the required 32,305 MW total. - Existing demand resources selected in the auction fulfilled 1,366 MW of the 2010 to 2011 reqm’t.

9.  FCM – Going Forward Lasting Market Momentum “New England’s competitive wholesale markets are entering a new era,” said Gordon van Welie, ISO New England President and CEO. “We are pleased with the participation and smooth execution of the first auction. This launch creates the market stability needed to encourage the long-term development of New England’s bulk electric power system in the most efficient manner possible.” FCA#2 - Active interest and involvement in this new market continues. At present, over 15,800 MW of new resources have expressed “Show of Interest” in participating in the second FCM auction, scheduled for December 2008. This includes: >14,000 MW of supply-side resources from traditional generation resources, including renewables and imports, and >1,800 MW of demand-side resources. FCA#2 Qualification: Not all of the proposals received will qualify to compete for selection in the second FCM auction. ISO New England will work with the New England Conference of Public Utilities Commissioners and the New England Power Pool in the months ahead to determine the amount of resources to be purchased in the second FCM auction for availability from June 2011 through May 2012. “The considerable interest in subsequent auctions clearly demonstrates the momentum behind this market and its potential to fulfill New England’s long-term electricity needs,” noted van Welie. Reference: ISO-NE News Release February 13, 2008

10. FCM Schedule (FCA#1 ? #8) ISO NEW ENGLAND MARKET RULES  (Reference: ISO-NE Market Rule 1, Section III.13 – FCM; 1st Rev Sht. No. 7313H Eff. Oct 1, 2007)

11.  FCM: CL&P - C&LM Next Steps C&LM WEEKLY FCM TEAM MEETINGS – Thurs (8:30 – 10:00) @ New Britain, CT FCM FCA #1: - ISO-NE Conducted First Forward Capacity Auction: Feb 04?08, 2008v - Deliver FCA#1 Capacity – June 1, 2010 ? May 31, 2011 FCM FCA#2: - Submission of FCA#2 Qualification Packages: **Due to ISO-NE on April 29, 2008. -ISO-NE Notifies Sponsors of Qual Package Review Status for FCA#2 08/01/08 - 1st of 4 FCA#2 FCA#2 Financial Assurance Installments to ISO-NE ~08/14/08 - ISO-NE Conducts Second Auction – FCA#2 12/01?05/08 - ISO-NE Notification to FC#2 Project Sponsors of Auction RESULTS ~12/10/08 - 2nd of 4 FCA#2 Financial Assurance (FA) Installments to ISO-NE ~12/18/08 - Deliver FCA#2 Capacity – June 1, 2011 ? May 31, 2012

12. FCM: C&LM Team Effort CL&P, C&LM FCM Team – (SOI & Qualification Packages Preparation): (FCA#1 Initial Team Assigned @Kick-off Mtg. 03-30-07) Ron Araujo – C&LM Management Lead Cathy Lezon – C&LM Supervision Lead; Steve Bruno – C&LM Supervision Financial Lead; Overall Qual. Package – ISO-NE interface Joe Swift – Analysis; Qual Pkg & M&V Plan Support Tim Simmonds – C/I Support; WMECO Qual Pkg. Sam Fankhauser – Project Lead; Don Flynn – M&V Lead – M&V Plans Dave Dobratz – Analysis; Load Response; DLC Dave Bebrin – Analysis; Dennis Beauregard – C&LM Tracking System; M&V Plan support; Diana Murphy – Data Support in preparation of Qual Pkg Supporting Documents Rebecca Meyer – Communications – Customer Acquisition Plan (CA); Review of Docs; etc; CL&P C&LM FCM Team - Supporting Staff: John J. Scricca – Team Support – Feedback from ISO-NE ODR Working Group Meetings Serina Valentin-Segura – Administrative Support of M&V Plan Preparation and Revisions Eve Sabino – Administrative Support of Qual Pkg Preps, file conversions; doc to pdf , etc. Judy Ries – Administrative Support of M&V Plan Preps and M&V Supporting Documentation Gentiana Darragjati – Independent Review of Qualification Package Notebooks Nomenclature/Codes * NUSCO Support – Dave Errichetti; Bob Olson; Steve Gibelli; Janet Palmer; Randy Shoop; James Clifford; Robert Howard; Phil Vece; Daphne Vayos; Phil Higgins; and others.

13. Questions