Natural Gas

Fuel Oil

Electricity

NARUC

November 2007

2NARUC

John B. Hess Chair John B. Hess

Chairman of the Board& Chief Executive Officer

“As an industry leader, we believe an educated customer adds value to the strength of our services.”

Introduction

3NARUC

• Hess Oil founded in 1933 by Leon Hess; merged with Amerada in 1968

• Built on a commitment to customer service

• Grown to be a leading independent energy company

• Fortune™ 100, fully integrated energy company:

– Exploration, production, refining, retail gasoline, and Commercial & Industrial energy marketing

Hess is a leader in producing, refining and marketing energy.

4NARUC

Geographic Focus

Hess is a regional total energy supplier.

Pittsburgh

Charlotte

Baltimore

Syracuse

Woodbridge

Providence

Oil Only

Gas Only

Gas + Oil

Gas + Oil + Electricity

Oil 15 States

Gas 15 States

Electricity 10 States

Gas + Electricity

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Hess Organization

Marketing and refining has four major business lines…

• Leading energy supplier to commercial, industrial, and wholesale customers

• East Coast and Ohio Valley geographies

• Significant presence in natural gas, fuel oil, and electricity

Retail Sales & Marketing

Supply & Terminals

Energy Marketing

• Over 1,350 locations

• Leading independent convenience retail marketer on the East Coast

• Set standards for quality, service and cleanliness

• Optimizes East Coast storage assets to supply petroleum products through 22 terminals

• Markets crude production

• Can handle new Ultra Low Sulfur Diesel

Tank P

ictur

e

Refining

• St. Croix, USVI refinery, jointly owned with Petroleos de Venezuela

• Port Reading, NJ refinery supplies Eastern US markets

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Hess – Electricity Market Area

N. Y. S. Electric and Gas

National Grid

Consolidated Edison Co.

Orange and Rockland

Rochester Gas and Electric

Central Hudson Gas & Electric

New York

Delmarva Power & LightDelaware

United Illuminating

Connecticut Light & Power/ Northeast Utilities

Connecticut

Rhode Island

Narangaset Electric Co. / National Grid

Baltimore Gas and Electric

Allegheny Power

Maryland

Delmarva Power & Light

Pepco

Duquesne Light Co.

Penelec (First Energy)

PECO Energy/ Exelon

Pennsylvania

Allegheny Power

UGI

Wellsboro Electric

Penn Power

Pennsylvania Power & LightPublic Service Electric and Gas

Jersey Central Power and Light

Rockland Electric Co.

New Jersey

Atlantic Electric

Maine

Central Maine Power

Bangor Hydro-Electric

District of Columbia

Pepco

Public Service of New Hampshire/ Northeast Utilities

New Hampshire

Granite State / National Grid

Fitchburg Gas & Electric/ UnitilMassachusetts

Massachusetts Electric, Nantucket Electric/ National Grid

Boston Edison, Cambridge, Commonwealth/ NSTAR

Municipal Electric Departments

Western Massachusetts Electric/ Northeast Utilities

Hess focuses its C&I business in 36 core EDC markets.

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Hess Natural Gas Market Area

Hess focuses its C&I business in 54 core LDC markets.

Columbia Gas of Ohio

Overlap

Ohio

Hope GasAllegheny EnergyOverlap

West Virginia

UGI Utilities

Columbia Gas of PA

PP&L/Penn Fuel Gas

Dominion-Peoples

Equitable Gas

Overlap

Pennsylvania

PECO

BG&ECONECTIV

Washington Gas Light

Columbia Gas of VA

North Carolina

PiedmontRhode Island

Providence Gas Co.

Valley Gas Co

(New England Gas)

Connecticut

Yankee Gas Services Co.

Southern Connecticut Gas

Connecticut Natural Gas Corp

Corning Natural Gas Co.

Central Hudson Gas & Elect. Corp.

Niagara Mohawk Corporation

NY State Electric and Gas Corp.

Rochester Gas and Electric Corp.

New York

Keyspan Energy Delivery NY

Consolidated Edison Co. of NY, Inc.

Orange & Rockland Utilities

Elizabethtown Gas Company

New Jersey Natural Gas Co.

South Jersey Gas

New Jersey

PSE&G

Keyspan Energy Delivery Long Island

New Hampshire

Keyspan Energy Delivery NH

Massachusetts

Boston Gas Co. (Keyspan)

Colonial Gas (Keyspan)

Baystate State Gas Co.

Commonwealth Nstar

Berkshire Gas

Fall River

Dominion East Ohio Gas

Cincinnati Gas & Electric

Northeast Ohio

PGW

NCNG

PSNC

PG Energy

Valley Cities

Northern Utilities NH

Maine

Northern Utilities Maine

Maine Natural Gas

Overlap

DelawareMaryland

Washington Gas Light

Virginia

South Carolina

PiedmontSCANA

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Natural Gas Supply Assets

We have built a strong supply network that often creates optimization opportunities…

1.05 Bcf/d Pipeline Capacity

19 Bcf Natural Gas StorageSupply from

Eastern Canada

Supply from Atlantic Canada

Supply from Gulf of Mexico

LNG

Supply from Midwest

Diverse Supply Sources

9NARUC

• Hess serves about 22,000 Commercial and Industrial (C&I) natural gas

customers throughout the Eastern US.

• Hess is one of the largest Natural Gas Marketers in the Eastern US, and is

dedicated to continued growth and customer service.

• Hess is the largest C&I market share by volume among Natural Gas Marketers

in New York, New Jersey, Ohio, Massachusetts and Rhode Island.

Natural Gas Business

10NARUC

How it works

• DEO replaced its gas cost recovery mechanism with a standard service offer

• All customers who had not switched to DEO’s choice program are eligible

• DEO buys gas for their customers from suppliers

• The price of gas is passed on to customers at SSO rate

• DEO continues to deliver gas to all customers, offers payment plans and handles all emergency and customer service calls

Dominion East Ohio SSO Service

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How the SSO rate was determined

• A descending clock auction was held August 29, 2006.

• Bids were received from 12 wholesale suppliers based on fixed adjustments to the NYMEX settlement price

• SSO rate changes monthly and DEO does not earn a profit on the gas it sells to customers, the purchased cost is passed on dollar for dollar directly to customers

12NARUC

Positives for participants

DEO

• DEO is able to exit the merchant function and is no longer subject to reviews for gas cost

PUCO

• No longer have to regulate gas costs

• Reliability is maintained because the utility remains in control of distribution, system operations and planning for future added load

• Percentage of Income Payment Plan (PIPP) customers are guaranteed the same low price as the SSO customers

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Positives for participants

Customers

• All customers have the benefit of competition without having to shop

• The customers are able to maintain their relationship with the utility

• The customers have PUCO protection

• Customers are assured the cheapest rates

• SSO customer can still switch to choice at any time

• The auction creates an easily determined comparable shopping rate

• An educated customer is needed for choice to work and some customers aren’t willing to spend the time to do the research

14NARUC

Evolution of SSO

• In the future we can change the way the price is derived

• Incentive for continued product development