Regulated Business Review and Northern Wood Power Project Tour

Northeast Utilities System

Regulated Business Review

and

Northern Wood Power Project Tour


Portsmouth, New Hampshire

September 23, 2005

2Northeast Utilities System

Safe Harbor Provisions

This presentation contains statements concerning NU’s expectations, plans, objectives, future financial performance and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, a listener can identify these forward-looking statements by words such as “estimate”, “expect”, “anticipate”, “intend”, “plan”, “believe”, “forecast”, “should”, “could”, and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results or outcomes to differ materially from those included in the forward-looking statements. Factors that may cause actual results to differ materially from those included in the forward-looking statements include, but are not limited to, actions by state and federal regulatory bodies; competition and industry restructuring; changes in economic conditions; changes in weather patterns; changes in laws, regulations or regulatory policy; expiration or initiation of significant energy supply contracts; changes in levels of capital expenditures; developments in legal or public policy doctrines; technological developments; volatility in electric and natural gas commodity markets; effectiveness of our risk management policies and procedures; changes in accounting standards and financial reporting regulations; fluctuations in the value of electricity positions; obtaining new contracts at anticipated volumes and margins; terrorist attacks on domestic energy facilities; and other presently unknown or unforeseen factors. Other risk factors are detailed from time to time in our reports to the Securities and Exchange Commission. We undertake no obligation to update the information contained in any forward-looking statements to reflect developments or circumstances occurring after the statement is made.


Topics for the Morning

• Regulated distribution business overview in Connecticut and Massachusetts

• PSNH and New Hampshire overview

• New Hampshire generation and Northern Wood Project

• NU transmission investment update


Overview of Connecticut and Massachusetts Delivery Businesses

Cheryl Grise’President – Utility Group


Overview of Regulated Businesses

Residential CommercialIndustrial/

OtherTotal

Revenues(12-months

ending 6/30/05)

Earnings for Common

(12-months ending 6/30/05)

Equity(6/30/05)

CL&P 1,077 108 7 1,192 $3,042 $75.2 $953.5

PSNH 409 69 4 482 $1,027 $46.7 $420.2

WMECO 187 19 2 208 $387 $12.3 $171.9

Yankee Gas

173 22 2 197 $448 $16.5 $232.4

Total 1,846 218 15 2,079 $4,904 $150.7 $1,778.0

Numbers of customers in thousands as of 6/30/05 In millions of dollars

*Excludes acquisition premium

*

*


CL&P Distribution: Critical Success Factors

• Timely recovery of flow-through costs– Transitional standard offer (TSO) payments

– Reliability-must-run payments

– Transmission costs

– Stranded costs (RRB)

• Distribution rates that provide timely recovery of and/or return on:– Increasing capital investments ($225 million of annual cap ex vs.

$125 million of depreciation)

– Rising pension, health benefit costs

– Other operating costs

• Strong customer service, reliability• Modest retail sales growth


CL&P Bill Components Today

The proposed transmission investments in CT will help contain generation, congestion, and RMR costs.

2.70

0.471.070.27

1.81

5.99

0.82

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

June 2005 Total 13.123 cents/kwh

EAC

Generation

Federally MandatedCongestion Costs

Renewables, C&LM,SBC

Stranded CostCharge (CTA)

Transmission

Distribution

cents/kwh


New Connecticut Legislation Provides Opportunities, Some Challenges for CL&P

• Incentives provide new earnings opportunities for capacity built in CL&P service area

– $25/kw for new traditional capacity

– $200/kw for distributed generation

• CL&P could build its own generation, but it could be obligated to sell the capacity after five years

• Future of TSO procurement fee unclear after 2006– Begun in 2004

– Currently provides about $7 million of annual net income

– 0.5 mills/kwh is being collected now

– 0.25 mills/kwh additional incentive under review

– DPUC report back to legislature in early 2006 on procurement fee future

• Transmission tracker ensures timely recovery of rising transmission costs


Yankee Gas Growth Opportunities Focused on Infrastructure Investments

• LNG facility

• New line to New England Gas in Rhode Island through southeast Connecticut entered service in 11/04

• Support for construction of new generating capacity

– Considerable interest expressed to date

• $15 million of investment annually to improve reliability

• $15 million annually to meet load growth

• $15 million on meters, technology, highway relocations, other commitments

10


Yankee Gas LNG Project

• 1.2 Bcf LNG storage tank

• Vaporization capability of 60,000 mcf per day

• Liquefaction capability of 6,000 mcf per day

• Total costs estimated at $108 million

• Incremental capacity to fill supply gap

• Construction 35% complete

• Scheduled to be in service for the 2007/2008 winter heating season

• Will help insulate customers from price volatility

11


Status of Yankee Rates

• $14 million distribution rate increase effective 1/1/05

• Next rate case expected to be filed in late 2006 to be effective 7/1/07 or when LNG facility enters service, whichever is sooner

• Full pass-through of purchased gas costs

12


WMECO Remains Quiet on Regulatory Front

• $6 million distribution rate increase 1/1/05 has allowed earnings to stabilize

• $3 million distribution rate increase approved for 1/1/06

• Rate case will be filed around 7/1/06 to be effective 1/1/07

• Capital investment smaller than other subsidiaries, but still twice depreciation

– $40 million for T&D in 2005

• Full and timely pass-through of purchased power costs

13


We Are Closely Watching Retail Electric Sales

2.4%

-6.0%

2.6%

5.7%1.3%

-0.8%-7.4%0.0%

YTD sales through August (2005 vs. 2004)(percent increase/decrease)

Actual Electric Sales Weather-Adjusted Electric Sales

Residential Commercial Industrial Total Retail Electric

14


PSNH Overview

Gary LongPresident and Chief Operating Officer

15


• 5,445 square miles

• 211 New Hampshire communities

• More than 480,000 customers

• 8,041,000 megawatt hours in annual sales

• 1,234 employees

• 1,000 miles of transmission and about 12,000 miles of distribution lines

PSNH Service Area: Key Facts

16


PSNH Generation Organization (NWPP Focused)

Cheryl Grise’President – Utility Group

Gary LongPresident & COO - PSNH

John MacDonaldVice President - Operations

William SmagulaDirector – PSNH Generation

Richard DespinsSchiller Station Manager

Jody TenbrockManager, Fuel Purchasing & Supply

Michael HitchkoNWPP Project Manager

17


Major NH Electric Restructuring Timeline

2000: Electric restructuring laws approved by the NH Legislature consistent with a 1999 state settlement agreement with PSNH

2002: Electric restructuring laws modified to restrict PSNH from divesting its generating units until at least 2004

2003: Electric restructuring laws modified again to restrict PSNH from divesting its generating units until at least April 30, 2006. PSNH to divest its generation only if it is in the economic interest of PSNH’s retail customers

The changes allowed PSNH to modify its generation facilities with cost recovery thus enabling the NWPP

18


PSNH Regulatory Rate Settlement of 2004

• T&D rate increases of $3.5 million on 10/1/04 and $10 million on 6/1/05

– Partially for the purpose of recovering costs due to the transfer of 34.5kv system assets from transmission to distribution rate base

• Commitment to invest at least $60 million in capital improvements to its electric system in 2005

• No specified ROE

• No requirement or restrictions on a filing date for a new rate case

• The revenue requirements associated with the Northern Wood Power Project are recovered fully through reconciled energy service prices, subject to a NWPP “Risk Sharing Agreement”

19


Other Key PSNH Regulatory Items

• Generation ROE

– NHPUC lowered ROE on PSNH generation equity from 11% to 9.63%, effective 7/1/05

– Affects about $100 million of equity

– PSNH’s request for reconsideration is pending before the NHPUC

• Fully tracking energy charge

– Set once a year with the option of a mid-year change if needed

– Recovers actual purchased power and fuel costs

– Recovers all costs related to generation including a return on investment

20


PSNH Retail Rates Today

2.51

7.24

0.30

3.37

0.38

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

Stranded Cost RecoveryCharge

System Benefits Charge

Consumption Tax

Energy

Transmission

Distribution

cents/kwh

September 2005 Total 13.855 cents/kwh

0.055

21


New Hampshire Economy Remains Strong

1.7%

1.1%

2.0%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

-0.5%

0.6%

-0.8%

-1.0%

-0.5%

0.0%

0.5%

1.0%

5.2%4.8%

3.6%

0.0%

2.0%

4.0%

6.0%

8.0%

Employment Growth(% change 7/05 vs. 7/04)

Manufacturing Employment Growth(% change 7/05 vs. 7/04)

Unemployment Rate(July 2005)

New Hampshire New England U.S.

22


PSNH Generation

John MacDonaldVice President - Operations

23


PSNH Generation in 2004

30% Purchases

70%

PSNH-Owned Generation

Meeting Customer Demand PSNH-Owned Generation

Purchases

Purchases

24


PSNH Generation Fleet

Unit Capability Year in Service

Coal Merrimack Unit 2 320 mw 1968

Merrimack Unit 1 113 mw 1960

Schiller Unit 4 50 mw 1952



Oil/Gas Newington 406 mw 1974

Wyman 20 mw 1978

Merrimack CT 43 mw 1968

Schiller CT 18 mw 1970

Lost Nation CT 18 mw 1969

White Lake CT 22 mw 1968

Hydro Amoskeag 18 mw 1922 – 1924

Smith 15 mw 1948 – 1949

Garvins 14 mw 1907 – 1981

Other Hydros 21 mw 1912 - 1927

25


PSNH Generation Fleet is Competitive

$75 Million in Savings Annually

0

1

2

3

4

5

6

7

8

9

PSNH-Owned Generation+ Market Purchases

Open Market*

7.24¢

8.50¢

* Forecast estimate

cents/kwh

26


Schiller Station: Future Site Plan

Northern Wood Power Project

27


Sources of Wood for the Northern Wood Power Project

Fuel will be delivered by truck

28


New Hampshire is a Small, Heavily Forested State

• Covers 5.7 million acres, with about 1.3 million residents

• Second most forested state in the nation (80%)

• Home to one of the oldest private forest conservation organizations in the country (Society for the Protection of NH Forests: 1901)

• Forest products industry in NH is a major employer and economic force

– Forestry represents $3.9 billion in economic activity statewide, roughly 11% of the gross state product

29


The Wood-Chip Market in NH Peaked at About 1.8 Million Tons Annually in 1992

0

500,000

1,000,000

1,500,000

2,000,000

1982 1986 1990 1994 1998 2002

Peak

Wood-fired IPP Buyouts

Start

Tons

30


The Process: Delivery to Electricity

31


The Economics of the Project Are Strong

Capital Cost of the Project

Estimated total cost $75 million

• Purchase and install new boiler, stack, environmental and fuel equipment

• Balance of plant/civil addition/modifications

• Engineering, permitting, and construction and AFUDC

Operating Cost of the Station

• $300,000 projected increase annually

Variable Fuel Costs

• Coal on existing boiler $28-32/mwhr

• Wood on new boiler $32-38/mwhr

Additional Revenue and Avoided Cost Associated with the Project

Sale of additional incremental generation: $2-3M/year

Reduced emissions cost: $3-5M/year

Sale of renewable energy credits: $8-12M/year

Production tax credit: $3M/year

32


Environmental Benefits

Using wood for fuel has significant environmental benefits

33


The NWPP Leverages an Emerging Market for “Green Power” in the Region

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

MA REC's CT REC's Total MA & CT REC's Schiller RECs

RE

C’s

34


NWPP Regulatory Treatment

Total Investment$75 Million

Equity: $33.75M (45%)

Allowed return:9.63%

Earnings: $3.25M/year

50/50 sharing of supplemental revenues and rebates over or below settlement baseline*

Debt: $41.25M 55%

* Includes revenue from the sale of Renewable Energy Certificates or Renewable Production Tax Credits

35


The Technology Planned for the Project Boosts the Environmental Benefits

• A circulating fluidized bed (CFB) type boiler will be installed at Schiller Station to replace an existing boiler

– Known and proven technology

– Significantly lowers emissions

– Provides for fuel flexibility

– Qualifies for the renewable portfolio standard (RPS) in Massachusetts and Connecticut

36


Northeast Utilities Plans for Investment in Transmission Infrastructure

Lee OlivierPresident – Transmission Group

37


The Nation’s Transmission System is in Need of Significant Additions and Upgrades

• A 2001 Edison Electric Industry (EEI) study identified $56B in transmission infrastructure investment needs.

• The Federal Energy Regulatory Commission (FERC) has identified $12B that is needed simply to relieve immediate congestion points.

• The August 14, 2003 blackout report addresses the need for significant new transmission investments.

FERC’s Electric Transmission Constraint Study identified congestion points that need immediate relief.

MAPP

SPP

ECAR

SERC

FRCC

MAIN

NWPA

AZ/NM/SNV

RMPA

ISO-NE

NYISO

PJM

SW CT Interface

Southeast PA West VA/PJM Interface

Southeast West VACentral MO

East KS/MO Interface

Northeast AZ

Central IA

WY/ID InterfaceCA/OR Interface

Pacific DC Intertie

East NY

Central CA

Southern CA

CA/MX

Northeast of Boston

Southwest MI

: Constraint and constrained flow direction

Transmission Constraints in the Contiguous U.S.

3737

38


About Northeast Utilities Transmission…

Operating CompanyTransmission Circuit

MilesTransmission Substations

12/31/04 Net Plant

in Service

($ Millions)

CL&P 1,671.5 38 293.1

WMECO (including HWP & HPE)

470.5 18 58.6

PSNH 997.5 52 119.7

Total NU 3,139.5 108 471.4

Comparative Ranking of NU at 12/31/04(Of the 20 largest transmission companies in the 11 Northeastern States)

• 4th Largest in terms of miles

• 10th largest in terms of Net Transmission Assets

39


In New England, the Regional Transmission Expansion Plan (RTEP) Identifies Nearly $2.4 Billion in Projects

RTEP05 Transmission Projects

57%

18%

10%

9%

5%

1%

NU

NGrid

NSTAR

UI

Bangor Hydro

Energy East

NU’s part of that transmission expansion program is over $1.4 billion.

40


Transmission Investment has a Favorable Regulatory and Financial Environment

• NU’s transmission tariffs fully track all transmission costs;– Rates are forward looking, based upon forecasted investment level– Rates are adjusted every six months– Provide for recovery of allowed cost of equity – Rates are trued-up annually

• The combination of forward looking rates and the annual true-up provision lower the risks associated with recovery of transmission investment.

• ROEs granted by FERC are more robust than those being granted by retail commissions, and reflect FERC’s policy of providing incentives for transmission investment.

• NU has put in place other initiative to manage risks– Internal organizational realignment with new transmission officers that have experience with

large capital projects in both nuclear and T&D– Enlisting top external engineering firms as agents on large projects providing engineering,

procurement and construction management– Conducting competitive bids on large components of all major projects– Implemented a risk management process with help from an external consultant on all major

projects

41


Transmission Group Asset Strategy for 2005

NU expects to spend $245 million for its transmission capital program for 2005

Five large projects in Connecticut comprise over two-thirds of the capital program:

Bethel-Norwalk $121.9M

Middletown-Norwalk $18.0M

Glenbrook Cables $3.9M

Long Island Replacement Cable $8.3M

Haddam Autotransformer $14.0M

The remaining one-third is comprised of nearly 200 projects in Transmission’s three-state region:

Connecticut $42.5M

Massachusetts $12.5M

New Hampshire $23.9M

$166.1M

$78.9M

42


NU’s Transmission Asset Strategy Has Identified Both Current and Future Transmission Investments

• NU’s Transmission Asset Strategy has identified the need for significant capital investment on franchise in all three states

• Transmission interconnections and interstate seams issues will become regional planning initiatives

• Technological advancement will create additional opportunities to invest

Under Construction

Siting Approved

Future Project

Legend

White Mountain Upgrade

Madbury Capacitor

Gosling Road Substation

Scobie SubstationFitzwilliam Substation

Tioga

Berkshire Solution

Springfield SolutionWoodland Capacitor

Pleasant Capacitor

Southern New England Reliability Project (SNERP)Northeastern Connecticut

Haddam Autotransformer

Barbour Hill Autotransformer

Middletown - Norwalk

Long Island Replacement Cable (LIRC)

Glenbrook Cables

Bethel - Norwalk

Plumtree - Triangle

Hudson – Scobie Line

43


The Need: An Adequate Transmission System

SWCT improvements have been a top priority in each of ISO-NE’s last four regional transmission expansion plans. Our four major

projects there total over $1.3 billion in investment.

345-kV115-kV

50% of CT 50% of CT LoadLoad

Bethel-Norwalk 345 kV Underground & Overhead$300-350 Million 21 miles 345kV

(56% underground)

10 miles 115kV (100% underground)

Projected in-service date: Dec 2006

Middletown-Norwalk 345 kVUnderground & Overhead$672-792 Million* (CL&P 80% Share)



Projected in-service date: 2009

Glenbrook Cables 115 kV Underground $120 Million 9 miles 115kV underground

Projected in-service date: 2008

Long Island Cable 138 kV cross sound$72 Million (CL&P 50% Share)

13 miles 138kV submarine cable

Joint project with LIPA

Projected in-service date: 2007 *Costs are being reevaluated

44


Financial Implications

For customers:

– Improved reliability – creates secure supply, quality service and stable environment for production and growth

– Lower levels of congestion and less LICAP exposure results in lower bills

– Increased access by competitive generators should lower costs

For shareholders:

– Increases in rate base from investments drive earnings growth (compound annual growth rate greater than 20%)

– $500 million of current rate base

– $1 billion - $1.5 billion of capital spending projected in 2005-2009

– Siting for our large projects is progressing

– Our cost recovery mechanisms are largely defined

45


Transmission Capital Expenditures*

$ Millions NU’s Transmission growth has already begun.

* Spending levels depend on final level and timing of all projects.

$55

$99

$171

$245

$285

$250

$375

$255

$20$0

$50

$100

$150

$200

$250

$300

$350

$400

2001 2002 2003 2004 2005 2006 2007 2008 2009

Actual Forecast

46


We Believe that a Significant, Continuing Stream of Investments in Transmission is Sustainable

• Line rebuilds to replace aging, low capacity conductor • Voltage conversions from 69 kV to 115 kV • Additional 345 – 115 kV autotransformers• New 115 and 345 kV lines (overhead and underground) to meet load growth and to increase transfer

capability across constrained interfaces• New substations to meet load growth

$55

$99

$171

$245

$285

$250

$375

$255

$20$0

$50

$100

$150

$200

$250

$300

$350

$400

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Actual Forecast

47


Q & A

Documents

Regulated Business Review and Northern Wood Power Project Tour