The Road Ahead A Path Towards a Cost Effective, Lower Carbon Future

1. The Road AheadA Path Towards a Cost Effective, Lower Carbon Future Jim Robb Senior Vice President October 16, 2008

2. Overview of Northeast Utilities • Public Service of NH • 490,000 customers • Owns 1,100 MWs of cost of service generation. • 4.5 MMt CO2 emissions (coal generation) and 3 MMt CO@ (purchased power) • EE Spending ~ $15MM/year • Western Mass. Electric Co. • 200,000 customers • Owns no generation • 1.0 MMt CO2 emissions (purchased power) • EE spending ~$10MM/year • Connecticut Light & Power • 1.2 million customers • Owns no generation • 9.5 MMt CO2 (purchased power) • EE spending ~ $80MM/year • Yankee Gas Services Co. • 200,000 customers • 2.5 MMt CO2 (purchased gas) • EE spending ~ $2.6MM/year

3. A Great Time to Make Change Happen • System reliability • Fuel Diversity • Resource adequacy Reliability Concerns • High commodity costs • “Peaky” demand growth • Infrastructure modernization Continuing Rate Pressure Advancing Technology • Renewables • Grid communications (AMI/ BPL) • Customer networks Increasing Environmental Pressure • Energy efficiency • Reduced emissions • Renewable Portfolio Standards • Demand Response

4. New England’s Environmental Targets 22-24 million MWh/yr of new renewable generation needed by 2025 • Energy Efficiency • Renewable Resource Development • Low carbon imports (Canada) Levers to Comply 71 25-38 million MWh of new non-emitting generation needed to achieve 2025 target 54 2025 Target 2025 Expected Bus. As Usual Range

5. New Energy Efficiency and Demand Response Models 3. Economic Low Emissions Imports • Multiple opportunities • New Business Models • Adoption barriers • Quebec • New Brunswick • Newfoundland & Labrador • Development of New England Renewable Resources • Supportive Regulatory & • Legislative Policies • Wind • Biomass • Solar • Distributed • Renewable Capacity • Transmission Pricing • EE Standards & Financing • Long Term PPAs The Four Pieces of the Puzzle

6. States are creating the framework for substantial opportunity • Massachusetts • Green Communities Act • - Energy Efficiency market expansion • - Utility investment in distributed resources • - Broader access to renewables • - MA Energy Efficiency Advisory Council • - Green power product • - Smart grid technology • Decoupling • RPS Targets  • RGGI • New Hampshire • Utility investment in distributed resources • Update EE standards • Office of Sustainable Energy • Investigating Decoupling Mechanisms • RPS targets  • RGGI • Connecticut • Connecticut EnergyEfficiency Fund • Connecticut Energy Efficiency Partners • Connecticut Clean Energy Fund • AMI pilot programs • RPS Targets  • Decoupling • RGGI • IRP

7. C & L M Programs By State Public Service of NH (2008) Program Lifetime kWh Savings Residential 125,620,897 Comm. & Industrial 350,206,433 Limited Income 13,612,881 Western Mass. Electric Co. (2007) Program Lifetime kWh Savings Residential 45,580,000 Comm. & Industrial 378,036,000 Limited Income 12,969,000 Connecticut Light & Power (2008) Program Lifetime kWh Savings Residential 586,935,000 Comm. & Industrial 1,575,941,000 Limited Income 135,002,000 Yankee Gas Services Co. (2008) Program Lifetime ccf Savings Residential 1,877,504 Comm. & Industrial n/a Limited Income 970,771

8. … but there’s an elephant lurking about • Probable Implications • Significantly slower economic growth (temporal issue) • Less money to invest (structural issue) • Possibly lower fuel costs (alternative energy economics more challenged) FINANCIAL CRISIS

9. Substantial Opportunities Exist in Energy Efficiency McKinsey & Company US GHG Abatement Curve

10. ProgramBudget ($1000s)1, 2 Lifetime MWh Savings AnnualkW Reduction 15,440 861,234 32,375 47,000 31,723 1,926,424 $10,330 197,300 0 $89,705 TOTAL 244,463 2,787,658 Energy Efficiency programs are cost effective .. Why aren’t they expanding? Northeast Utilities Proposed 2008 Budget/Impact Products • ECONOMICS • 25 MW of DR at ~ $330/kw • Lifetime EE savings at ~ $28/mwh • National recognition • WHAT ARE THE BARRIERS? • Limited program funding • Opt in programs • Agency Issues • Decision making algorithm • HOW BIG IS THE MARKET? • Remaining EE potential estimated to be substantial, 38b kWh achievable by 2030 in Northeast (EPRI) • NU programs are routinely over-subscribed • 36% of budget • 31% of kwh savings • 6% KW savings Retrofit / Weatherization Residential New Construction L. I. Retrofit Small Retrofit • 52% of budget • 69% of kwh savings • 13% KW savings Large Retrofit Commercial & Industrial New Construction Products / Other Load Mgmt & Demand Response3 Notes: 1. The proposed program budgets shown above do not include $9.3 million designated for general support and education program costs. 2. The budget totals do not include additional funding approved after the proposed budgets had been filed. In a decision filed by the DPUC on June 19, 2008 in Docket No. 07-10-03, CL&P’s planned budget of $67.9 million was increased to the approved level of $88.7 million. In addition, on September 24, 2008, the DPUC in Docket No. 07-10-03RE01 allowed CL&P to spend an additional $10 million from their 2009 budget to help fund 2008 programs. 3. Program budget numbers and annual kW reductions include CL&P 2008 EIA Demand Response totals. In an August 8, 2008 FMCC filing with the DPUC, CL&P estimated a year end total budget of $9.5 million and savings of 172.1MW.

11. Meeting energy efficiency objectives • Drive implementation through the utilities and leverage their scale economies, branding, and low cost customer access • Move forward with decoupling utility revenues from sales volumes • Develop a new funding and incentive mechanism (suggested mechanisms are small and incremental relative to magnitude of the challenge in front of us)

12. The potential role of AMI

13. Renewable resource potential in our markets New England’s Most Attractive Renewable Energy Locations Eastern Canadian Resources Newfoundland & Labrador Exploring development of large hydro facilities H H B W Quebec Hydro Quebec plans $20 Billion investment in hydro and export transmission B W H W B W Biomass B Hydro H W B Nuclear N N New Brunswick Exploring development of 1 or 2 nuclear units Wind W W General Movement Of Power Transmission will be required to move power from these northern resources to load centers in southern New England

14. Germany: ~1,000 MW in 2006 United States: ~100 MW in 2006 Solar programs are all about will, not the resource Source: EPRI

15. New England’s best wind sites are world class…but remote from load Class 6 & 7 Potential Source: Levitan & Associates

16. Why Canada should fit in the picture • Canada as supplier • Vast hydro resources and significant capacity expansion underway in Quebec • Outstanding wind resources • Potential for nuclear development • Winter peak/summer peak compatibility • New England is a higher cost market, presenting opportunity for good margins on sale while being economically beneficial to New England • Benefits to New England • Injection of 1,200 MW of new capacity (limited by NERC first contingency constraints) and energy should reduce LMPs paid by all New England customers • Carbon emissions are lowered significantly through 1 significant action

17. Impact of integrated actions 3. Build 1200 MW tieline to Canada 2. Add 2200 MW of New England renewables 1.Cut growth in energy use by 30-50% On CO2 Goals On RPS Goals Tons CO2 (Millions) GWH, 000’s 30 30 24 21 25 25 20 20 (3-5) 15 15 (6) (7-9) 10 10 (3) 3 2 5 5 (6) (11) 0 0 Energy Efficiency Energy Efficiency 2025 GAP 2025 GAP Remainder Canadian Imports New England Renewables Remainder Canadian Imports New England Renewables The actions described would resolve 75 - 85% of New England’s Policy Objectives

18. At the end of the day… • Over time, migrate from “kWh saved” to “eCO2 avoided” focus and capture increasingly feasible tradeoffs among • Good old fashioned conservation investments and behavior incentives • Maturing technologies (AMI, renewables, distributed generation) • Emerging end use fuel switching opportunities (PHEV, electric heat pumps, etc.) • Restructuring generation fuel mix (swap high carbon for low carbon generation)

19. Benefits of Electrification • Electric heat pump vs. natural gas • 41% reduction in energy consumed • 32% reduction in carbon footprint • Plug In Hybrid Vehicles vs. Internal Combustion Engine • Consume 1800 kwh ($360/year @ 20 cents/kwh) • Save 300 gallons gasoline ($900/year at $3.00/gallon) • Save 32 MMBTU/year • 38% reduction in CO2 (current generation mix) • 47% reduction in CO2 (projected 2030 generation mix)

20. THANK YOU