northeast utilities’ five-year infrastructure investment plan wall street access january 10, 2008
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1
Northeast Utilities’ Five-Year
Infrastructure Investment Plan
Wall Street Access
January 10, 2008
Lee Olivier, Executive Vice President – Operations
2
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 or inactions by local, state and federal regulatory bodies; competition and industry restructuring; changes in economic conditions; changes in weather patterns; changes in laws, regulations or regulatory policy; changes in levels or timing of capital expenditures; developments in legal or public policy doctrines; technological developments; changes in accounting standards and financial reporting regulations; fluctuations in the value of our remaining competitive electricity positions; actions of rating agencies; subsequent recognition, derecognition and measurement of tax positions; 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. Any forward looking statement speaks only as of the date on which such statement is made, and 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.
3
Today’s Discussion Topics
Key Initiatives
Regulated Investment Strategy
Transmission
New England’s Future Energy Challenges and Opportunities for NU
Generation
Distribution Rate Cases
Regulatory Updates
Emerging Challenges of Distribution Reliability
4
Strong Execution of 2007 Strategy & Business Plan
Completed capital spend of $1.3 billion
All major infrastructure projects on schedule and on budget
Yankee Gas LNG facility in service and in rates
Achieved PSNH and Yankee Gas rate settlements
Successful completion of NERC compliance audit
Consolidated system reliability target met
Advancing future initiatives
Northern New England, Canada transmission concept projects
Connecticut: Automated Meter Infrastructure; Integrated Resource Plan; Peaking Generation Proposal
Major projects delivering significant value for customers
5
Key Signposts For Our Continued Success
Continue to successfully execute
Effectively deploy the capital in the five-year plan
Manage the regulatory business model to earn on the capital
Develop and deliver solutions for the region’s energy challenges
Identify projects that have reliability, environmental and cost benefits for
customers
Transmission
7
Transmission Capital Program and Rate Base Continue to Grow
2006 2007 2008 2009 2010 2011 2012
Fall 2005 EEI Conference
Today
Fall 2006 EEI Conference
Five-Year Capital Program -- $2.3 Billion
Five-Year Capital Program -- $3.0 Billion
Five-Year Capital Program -- $2.4 Billion
Annual Plant-in-Service: $ Millions
$391 $307 $724 $883 $341 $396 $617
(Actual) (Projected)
Operating Company
Actual
12/31/06
Rate Base
($ Millions)
Projected
12/31/12
Rate Base
($ Millions)
CL&P 841 2,864
WMECO 71 621
PSNH 134 459
Total NU 1,046 3,944
(Actual)
8
Rate Base Composition
2006 Rate Base Composition
2012E Rate Base Composition
$4.5 billion
$9.4 billion
Rate Base: $1.05 billion (Actual 2006)
’07-’12 Capex: $3.8 billion
Rate Base: $2.9 billion (Actual 2006)
’07-’12 Capex: $3.0 billion
Rate Base: $0.5 billion (Actual 2006)
’07-’12 Capex: $0.4 billion
ElectricityTransmission
ElectricityDistribution & Generation
Gas LDC
Transmission becomes much larger share of total rate baseTransmission becomes much larger share of total rate base
23%
11%
66% Transmission
Gas
Dist. & Generation
42%
9%
49%
Transmission
Gas
Dist. & Generation
9
2008-2012 Transmission Capital Expenditures
Increase By Over 20% From Previous Five-Year Program
$0
$100
$200
$300
$400
$500
$600
$700
$800
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Major Southwest CT NEEWS Springfield 115-kV Cables Other
Historic Forecast
In M
illio
ns
Up To $3.0 Billion $1,816 Million
$560 million of major SWCT
projects in 2008-2012 forecast
period; $1.68 billion in total
NEEWS projects estimated at
$1 billion during the 2008-2012 forecast
period
$1.1 billion of additional
forecasted projects
Successful completion of
SWCT projects
NEEWS projects ramping up
Springfield 115-kV Cables projects
estimated at $350 million during the
2008-2012 forecast period
Springfield 115-kV Cables project
ramping up
10
Four Major Southwest Connecticut Transmission Projects –
A $1.68 Billion Investment, About 2/3 Complete
Bethel-Norwalk 345-kV underground& overhead$350 Million
21 miles 345-kV (56% underground)
10 miles 115-kV (100% underground)
Completed October 2006 at a cost of $335 million Middletown-Norwalk 345-kV
underground & overhead$1,047 Million (NU share)Glenbrook Cables
115-kV underground$223 Million
9 miles 115-kV underground
Projected in-service date: December 2008
Under contract – construction under way, 69% complete at 1/04/08
Long Island Cable138-kV cross-sound$72 Million (NU share)
11 miles 138-kV submarine cable
Joint project with LIPA
Projected in-service date: mid-2008
63% complete at 1/04/08
69 miles 345-kV (35% underground)
57 miles 115-kV (1% underground)
Joint project with United Illuminating
Projected in-service date: Second-half 2009
62% complete at 1/04/08
COMPLETE
50% of CT Load
11
NEEWS and Springfield 115-kV Cables Projects Will Better
Connect Eastern, Western New England by 2013
Springfield 115-kV Cables Project
SPRINGFIELD
HARTFORD
345-kV Substation
Generation Station
345-kV ROW
115-kV ROW
Greater SpringfieldReliability Project
Central ConnecticutReliability Project
InterstateReliability Project
12
Springfield 115-kV Cables & NEEWS Project Schedules
NEEWS
Springfield 115-kV Cables
Greater Springfield Reliability
(115-kV/345-kV)
Interstate Reliability (345-kV)
Central CT Reliability (345-kV)
ISO technical applications approval
December 2007 Mid 2008 Mid 2008 Late 2008
State siting application filed
December 2007 Mid 2008 Mid 2008 Late 2008
Procurement contracts
2008 - 2010 2009 – 2012 2009 – 2012 2010 - 2012
Siting completed Early 2009Late 2009/Early
2010Late 2009/Early
20102010
Construction targeted to start on staggered basis
2009 2010 20102010/Early
2011
In-service 2011 Late 2012/2013 Late 2012/2013 2013
13
Other Forecast Projects Total $1.1 Billion
$1.1 Billion
CL&P
115-kV Reliability Program 30.0
Fiber Optic Communications 20.0
310/368 Line Split 29.0
Eastern Connecticut Reliability 190.5
Barbour Hill Autotransformer 10.7
Aging Equipment & NERC Compliance Upgrades (24% in RSP) 91.4
Numerous Projects Addressing Maintenance, Reliability & Load Growth (55% in RSP) 202.9
Total CL&P Other Projects 574.5
$'s Millions WMECO
115-kV Reliability Program 15.0
Fiber Optic Communications 10.0
Ludlow Transformer Repl. 12.0
Berkshire 2nd Autotransformer 9.9
Aging Equipment & NERC Compliance Upgrades (100% in RSP) 64.5
Numerous Projects Addressing Maintenance, Reliability & Load Growth (46% in RSP) 23.5
Total WMECO Other Projects 134.9
$'s Millions PSNH
115-kV Reliability Program 25.0
Fiber Optic Communications 15.0
Scobie 3rd Autotransformer 12.4
White Mountain Region Upgrades 14.9
Monadnock Region Upgrades 26.6
Nashua Area Solution 14.0
Deerfield & Gosling Autos 52.7
Aging Equipment & NERC Compliance Upgrades (64% in RSP) 163.8
Numerous Projects Addressing Maintenance, Reliability & Load Growth (42% in RSP) 76.9
Total PSNH Other Projects 401.3
$'s Millions
14
Future Resources Aligned with Our Strategic Business Plans
Construction Expertise – experienced, proven firms, track record with NU Burns & McDonnell (Transmission, including NEEWS) Washington Group International (Merrimack Scrubber)
Labor – partnering with the largest U.S. transmission constructor Contract signed with Quanta for $750 million in transmission construction services Provides for 70% of labor over the next six years
Material – established worldwide network to procure key components Transformers, poles, underground cables and control systems
15
Established Worldwide Access to Key Suppliers
GC Cable from Prysmian in Finland
GC DFR from Qualitrol in Ireland
GC Breakers & Switches from ABB Power in U.S.
GC Scada Cabinet from GE Harris in Canada
M-N Steel Poles from Thomas & Betts in U.S.
M-N Overhead Ground Wire from Intral in Canada
M-N 345-kV Breakers from HICO in South Korea
M-N Autotransformers & Transformers from Areva in Brazil
M-N Shunt Reactors from Siemens in Germany
M-N GIS from Mitsubishi in Japan
M-N 115-kV Cable from Prysmian in Italy
M-N 345-kV Cable from Silec in France
B-N Underground Cables from VISCAS in Japan
New England’s Future Energy
Challenges and Opportunities for NU
17
Next Initiatives: Dealing With New England’s Emerging
Energy Challenges
Challenges andOpportunities
Dependence on natural gas
Highelectricity
costs
Regional Greenhouse Gas Initiative
(RGGI)requirements
IncreasingRenewable Portfolio
Standards(RPS)
18
By 2020, a 17,000 GWh Gap Exists Between Existing Renewable
Resources And The Amount Required To Meet The RPS
Magnitude of meeting this challenge 2,500 MW of biomass (~$12 billion), or 6,600 MW of wind (~$8 billion), or 16,400 MW of solar (~$128 billion)
Magnitude of meeting this challenge 2,500 MW of biomass (~$12 billion), or 6,600 MW of wind (~$8 billion), or 16,400 MW of solar (~$128 billion)
CT: 27% by 2020
VT: 2005-2012 Load growth
to be met with renewables and capped at 10%.
ME: 40% by 2017
(currently 30%)
NH: 23.8% by 2025
RI: 16% by 2019
MA: 4% in 2009; 1% annual
increments thereafter
New England RPS Requirements
0%
5%
10%
15%
20%
25%
Year
% of
NE
Ener
gy
Requ
ireme
nts
RPS Requirements - % Existing Renewables - %
17,269 GWh
2020
19
Meeting the Regional Greenhouse Gas Initiative (RGGI)
Requirements Will Be A Challenge
Magnitude of meeting this challenge for New England
31,400 GWh fossil generation replaced with low/no emissions resources
Equivalent to 4,500 MW of baseload generation (80% capacity factor)
Magnitude of meeting this challenge for New England
31,400 GWh fossil generation replaced with low/no emissions resources
Equivalent to 4,500 MW of baseload generation (80% capacity factor)
RGGI CO2 Emissions
40
60
80
100
120
140
160
180
200
220
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year
Mill
ion
s o
f T
on
s
New England RGGI CO2 BudgetProjected New England CO2 Emissions10 State RGGI CapProjected 10 State CO2 Emissions
Projected New England CO2 Emissions @ 1.3% energy growth
New England RGGI Budget
10 State RGGI Cap
Projected 10 State CO2 Emissions (Source: Environment Northeast Business as Usual Scenario)
Projected CO2 Gaps: 10 State – 32 Million Tons New England – 18 Million Tons
20
Northern New England and Eastern Canada Will
Become Valuable Sources to Meet New England’s Needs
H
N
W
Hydro
Nuclear
Wind
B Biomass
General Movement Of Power
New England’s Most Attractive Renewable Energy Locations
W
W
WW
W
B
B
B
B
N
H
H
H
QuebecHydro Quebec plans $20 Billion investment in Hydro and export transmission
Newfoundland & LabradorExploring development
of large Hydro facilities
New BrunswickExploring development
of 1 or 2 nuclear units
W
Eastern Canadian Development
21
A Set of Complementary Projects with Tangible Benefits
for New England
HVDC Line from Hydro Quebec to central NH
HVDC Line from Hydro Quebec to central NH
HVDC Line Newington, NH to Boston Area
HVDC Line Newington, NH to Boston Area
Benefits A solution with real benefits for the region
Economic value CO2 reduction
Renewable resource additions Fuel diversity
HVDC tie line with Hydro Quebec allows for large import capability into New England
Optimizes use of existing and planned bulk power grid -- connects the DC tie line from Hydro Quebec at a good location on the New England AC system
Provides a new, strong and separate reliability path from HQ
Addition of north-south DC connection allows for enhanced power flows to southern New England load centers
Utilizes likely 345 kV upgrades in NH and VT to meet future reliability needs (in RSP today).
Utilizes likely 345 kV upgrades in NH and VT to meet future reliability needs (in RSP today).
22
Regulated Generation & Distribution
23
Regulated Generation Investments -- Merrimack Scrubber
Reduces 98% of sulfur emissions Reduces 85% of mercury emissions Avoids $15-20 million annually in sulfur credit purchases Impact on Merrimack production costs of no more than 0.6 cents/kWh, preserving
PSNH’s low-cost generation fleet Investment recovered through PSNH generation rates
Merrimack Scrubber Required by New Hampshire
statute for mercury emissions reductions
Estimated to cost $250 million Engineering, Procurement &
Construction (EPC) contract secured with Washington Group International in fall 2007
Construction start: 2009 Project completion: 2013
24
NU Distribution Infrastructure Investments
2008 – 2012 investment Invest $2.5 billion in distribution
capital spendingCL&P: $1.5 billionPSNH: $525 millionWMECO: $175 millionYankee Gas: $300 million
Peak Load Growth & New Business Support – 44%
Basic Business Requirements - 31% Plant Relocations Equipment Failures Information Technology Other Capital
Aging Infrastructure - 25% Regulatory Commitments Reliability/Obsolescence Facility Upgrades
25
Regulated Distribution Investments -- LNG Facility
LNG Facility Yankee Gas’s 1.2 Bcf liquid
natural gas production facility in Waterbury, CT
$108 million cost Completed in time for the 2007-
2008 heating season Enhances reliability and
insulates customers from price volatility
Lowers customer costs by $25 million a year
26
Completed Distribution Rate Cases
Company StatusEffective
DateInitial
IncreaseAuthorized
ROE
PSNHSettled and approved
7/1/07 $46.6 million 9.67%
Yankee GasSettled and approved
7/1/07$22.1 million net
10.1%
WMECOSettled and approved
1/1/07$1 million plus trackers
Sharing outside
8-12%
27
CL&P Distribution Rate Case
CL&P
Rate Increase$180 - $185 million in 2008
$22 million in 2009
ROE 11%
Capital Structure 45% equity (per rating agency)
DecouplingGuaranteed revenue/customer
No weather normalization
Distribution Capex $290 million/year
Tree TrimmingDouble to $25 million/year to support shorter clearing cycle
28
Regulated Generation, Distribution and Transmission Projects Provide Savings for Customers
Regulated generation and distribution projects provide benefits in the form of increased reliability and reduced energy costs for customers
Northern Wood Power Project is dispatching power below market and 100% of our renewable energy certificates are sold for 2007
New Hampshire-owned utility generation has resulted in the lowest energy costs for customers in New England – 7.83 cents per kWh – 33% lower than current market
Yankee Gas LNG facility is complete and will lower costs to customers by $25 million a year
Transmission projects provide benefits in the form of increased reliability and reduced congestion and capacity market costs
Bethel-Norwalk has reduced Connecticut congestion costs by more than $150 million since October 2006
Middletown-Norwalk is expected to provide $20 - $30 million in avoided costs
NEEWS projects are expected to provide additional savings of at least $200 million per year in reduced congestion and capacity costs
29
Emerging Challenges of Distribution Reliability
Dana Louth, CL&P Vice President – Energy Delivery
30
NU’s Distribution Business
Highlighted area reflects service territory
CompanyTotal #
Distribution Customers
Net Distribution
Assets
The Connecticut Light and Power Company
1,200,000 $1,918,000
Public Service Company of New Hampshire
490,000 $925,000
Western Massachusetts Electric Company
200,000 $372,000
Yankee Gas 200,000 $666,000
TOTAL 2,090,000 $3,881,000 1
1 000 omitted
31
$279$334
$291 $289 $298 $298
$125
$167
$144 $153$172
$252$34
$35
$40 $34$34
$34
$65
$57
$61 $60$62
$68
$0
$100
$200
$300
$400
$500
$600
$700
2007 2008 2009 2010 2011 2012
CL&P PSNH* WMECO Yankee Gas
*PSNH Generation = $36 million in 2007; $63 million in 2008; $44 million in 2009; $51 million in 2010;$66 million in 2011; and $142 million in 2012
$ M
illio
nsProjected Distribution and Generation Capital Expenditures
$503$536
$593
$566$536
$652
Total capital investments made in 2008-2012 will grow asset base by 39% after depreciation
32
CL&P Distribution Infrastructure Investments
2008 – 2012 investment CL&P expects to invest $1.5 billion in
distribution capital spending Peak Load Growth & New Business =
$570 million Basic Business Requirements = $310
million Aging Infrastructure = $585 million
Peak Load Growth & New Business - 39%
Basic Business Requirements - 21% Plant Relocations Information Technology Other Capital
Aging Infrastructure - 40% Equipment Failures Reliability/Obsolescence Regulatory Commitments
33
What is CL&P’s Aging Distribution Infrastructure?
(9%)(16%)
(12%)(18%)
(44%)
(9%)(13%) (10%)
(23%)
(45%)
29
42
49
0
10
20
30
40
50
60
0-30 31-40 41+
(41%)
(35%)
(24%)
Approximate Age of Metal Enclosed Switchgear
Number of Poles
Feet of Conductor
# of S/S
Plant that is relatively new
Plant that is beyond its useful life
Plant that is approaching the end of its useful life
Connecticut/New England saw much building/neighborhood development post-WWII Significant amount of plant is 50+ years old Average distribution plant age is 35 years
Approximate Pole Plant Age
61465
11206185406
125834
307489
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
0-10 11to 20 21-30 31-40 41+
Approximate Overhead Primary Conductor (ft)
3,2664,567
3,659
8,023
16,028
-
2,0004,000
6,000
8,00010,000
12,000
14,00016,000
18,000
0-10 11-20 21-30 31-40 41+
(44%)
(9%)(12%)
(16%) (18%)(9%) (13%) (10%)
(23%)
(45%)
34
Why Won’t Distribution Infrastructure Last Forever?
Type of Plant Aging Issues Results In
Poles Wood decayMore failures,
customer interruptions,
and safety
concerns
OH WiresLoss of strength/connections degrade
UG Equipment Insulation failure/rust
SubstationsMechanical and electrical wear
and tear, spare parts
35
How Much Distribution Equipment is Approaching the End
of its Useful Life?
40% of distribution plant is over 40 years old
Full replacement value of old obsolete plant at CL&P would cost about $5.2 billion
Asset Type Replace Cost
Overhead $3,829 Million
Underground $1,003 Million
Substation $ 330 Million
TOTAL $5,162 Million
CL&P 5-Year Plan vs. Aging Equipment Replacement Cost
5-Year Plan Replacement Cost
$0.6 Billion
$5.2 Billion
Total investment required to address major equipment at or approaching end of life in 2007
36
What’s The Impact Of Aging Infrastructure On Reliability
Provided To CL&P Customers?
0
20
40
60
80
100
120
140
160
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
SA
IDI M
inu
tes
CL&P Trendline +/- One-Half Std Deviation
System Average Interruption Index (SAIDI) measures the average number of minutes a typical customer is without power
CL&P SAIDI - CTPUC Criteria
0 5 10 15 20 25 30 35 40 45 50
Tree Caused
Equipment Failure
Vehicle Accident
Animal
Lightning
No Problem Found
Action by Others
All Other
Employee Error
Planned Outage
Overload
Reliability is generally degrading and…. equipment failure associated with aging infrastructure is a major cause of
degrading reliability
CL&P 2006 SAIDI (Non-Storm) was 132.63 minutes.
Top three causes contributed 96.71 minutes
Major Factors Impact CL&P Distribution Reliability
SAIDI
37
While An Aging Infrastructure Can Cause Degrading Reliability, Our
Customers Indicate They Will Not Accept Lower Reliability Levels
Distribution infrastructure improvements are needed to maintain reliable service “We are suffering from old infrastructure, where the lines and transformers are showing their age…That
affects the power we get.” *
Today’s digital economy requires reliable power “Brown outs or spikes is a problem for mechanical devices. Close to not having any power when it’s not
reliable.” *
Poor power quality adversely impacts our customers “We all agree that power is mission critical, got to have it to run your business no matter what it is.” *
Preventative maintenance is critical to equipment performance“Maintenance and uninterrupted service go hand-in-hand. You need the maintenance and the upkeep .” *
But….
Our customers are concerned about high rates.“Nothing else we do has gone up as much.” *
* Excerpts from Fall 2007 Customer Satisfaction Focus Group Study.
38
Challenges Associated with Aging Distribution Infrastructure
Identifying significant vulnerabilities through risk management initiatives
Prioritizing work
Executing upgrades
Rising cost of labor and materials – impact of world-wide demand on commodities
Attracting and retaining engineering and technical staff
Avoiding customer inconvenience during project construction
Cost of preventive maintenance programs
Rate impact of replacing depreciated equipment
Securing reasonable regulatory treatment to avoid rate lag
39
What is CL&P Doing to Address Distribution Infrastructure
Challenges?
Formed asset management organization
Created new major projects organization
Five-year capital investment plan
Formed vendor/supplier alliances
Partnerships with colleges/universities to develop power engineers
Upgrading inspection and maintenance plans
Working on strategies to moderate rate impact
40
Summary
CL&P and other NU distribution companies have an aging delivery infrastructure
A comprehensive upgrade strategy is required
Risk management/prioritization
Capital and O&M allocation
Capital additions likely to rise from today’s level as is rate base
CL&P continues to work with regulators
Fair regulatory treatment is key
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