1

Yankee Gas

Securities Analysts Presentation January 25, 2012

2

This presentation contains statements concerning NU’s expectations, beliefs, plans, objectives, goals, strategies, assumptions of future events, future financial performance or growth 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 or reader can identify these forward-looking statements through the use of words or phrases such as “estimate”, “expect”, “anticipate”, “intend”, “plan”, “project”, “believe”, “forecast”, “should”, “could”, and other similar expressions. Forward-looking statements are based on the current expectations, estimates, assumptions or projections of management and are not guarantees of future performance. These expectations, estimates, assumptions or projections may vary materially from actual results. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause our actual results to differ materially from those contained in our forward-looking statements, including, but not limited to, actions or inaction of local, state and federal regulatory and taxing bodies; changes in business and economic conditions, including their impact on interest rates, bad debt expense and demand for our products and services; changes in weather patterns; changes in laws, regulations or regulatory policy; changes in levels and timing of capital expenditures; disruptions in the capital markets or other events that make our access to necessary capital more difficult or costly; developments in legal or public policy doctrines; technological developments; changes in accounting standards and financial reporting regulations; actions of rating agencies; the effects and outcome of our pending merger with NSTAR; 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 or to reflect the occurrence of unanticipated events.

NU Safe Harbor Provisions

Yankee Gas: Connecticut’s Largest Natural Gas Distribution Company

Service Territory 2,088 sq. miles

Communities71 cities & towns

Total Customers206,000

Residential Customers181,000

Non-Residential Customers25,000

3

Yankee Gas Earnings: 2005 - 2010

4

In $

Mill

ion

s

5

Natural Gas Distribution:Growth Opportunities in New England

• Very attractive opportunities in New England due to natural gas’ low saturation and cost and environmental advantages over competing fuels

o Shale gas is a “game changer” for the region

• Siting and economics regulated by states

• Delivery and regulatory model constraints need to be addressed in Connecticut to increase penetration

U.S. Connecticut

Natural Gas 53% 25%

Oil 7% 59%

6

Natural Gas: Connecticut Has High Growth Potential

50%

31%

15%

4%

0%

20%

40%

60%

% C

T H

om

e H

eatin

g M

arke

t

CT Home Heating Market Penetration

#2 Heating

Oil

Natural Gas

Electric Heating

Propane

72%

53%48% 47%

31%

0%

20%

40%

60%

80%

% o

f p

en

etr

ati

on

of

na

tura

l ga

s

Natural gas penetration CT vs. other states

CTNJ NY RI MA

• Connecticut is significantly under penetrated and relies on higher priced fuels for space heating:

o Older housing stock

o Proximity to supply

o Price advantage is relatively new and made more dramatic by shale gas

• Increasing the penetration to 50% of the state would yield long-term benefits:

o Significant customer savings

o Reduced emissions

o Reduction in oil demand

• In the short-term, the investment in infrastructure to support such expansion would generate additional jobs (construction and craft labor)

7

Natural Gas: Yankee Gas’ Growth Potential

• Approximately 55,000 non-gas homes and businesses are within 150' of existing Yankee Gas mains

• 25,000 Yankee Gas customers are low-use, do not use natural gas for space heat (11,000 of which are single-family homes)

• Connecticut residents are already realizing the benefits of natural gas:

o In 2010, Yankee Gas converted approximately 1,000 single-family homes and multi-unit apartments to natural gas. In 2011, that number doubled to approximately 2,000.

o Commercial and Industrial customers are switching from Interruptible to Firm Service

3.4

6.2 6.3

5.0

3.1

Yankee Gas (firm)

2007 2008 2009 2010 2011 Thru 9/30

We

ath

er-

No

rma

lize

d%

ch

an

ge

ye

ar-

ove

r-ye

ar

8

Changing Dynamics are Shifting Historical Supply Paths

• Historically, the northeast U.S. has received the majority of its gas supplies from traditional production basins in the Gulf Coast and Western Canada

• The recent exploitation of shale gas resources closer to the market area, such as Marcellus Shale in WV, PA and NY is anticipated to provide large volumes of new production to the regional markets

• As shale gas production increases, supplies from traditional sources currently using the long-haul pipeline infrastructure serving the region will be displaced and flow to other markets

Traditional Supply Basins and Flow

Paths

9

4 for 1 Benefits of Expanding Natural Gas Distribution

Increasing Natural Gas penetration to 50% of Connecticut

households

• Creates 4,800 construction jobs and 3,000 craft labor jobs beginning in 2012 and sustaining for 5-10 years

• Eliminates 5.5 million barrels of fuel oil consumption per year (38% of CT consumption and 3% of US consumption – equivalent to eliminating 200,000 – 300,000 vehicles)

• Reduces greenhouse gas emissions by 1 million tons per year (equivalent to building 800 MW of wind or 1,600 MW of solar) and reduces particulate emissions by 49%

• Injects $250 million per year into CT economy by saving customers up to $1,100 per year on their heating bills

10

Our Expansion Plan Would Achieve a 50% Natural Gas Penetration For Residential, 75% for C&I After 10 Years

Phase I (2012-2016)

Phase II (2017-2021)

Convert 50-55% of existing prospects near mains

Focused main expansion targeting key anchor loads, while beginning to convert

new customers near these new mains

Convert remaining near main prospects achieving an 85% penetration

Continue to convert prospects on new mains

CT Residential

CT Commercial

CT Industrial

Natural gas residential penetration CT vs. other states

NJ NY RI MA

50%

75% 75%

Current level

Target level

72%

53%48% 47%

35% 35%

54%

0%

20%

40%

60%

80%

NG

res

iden

tial

pen

etra

tio

n %

11

Customer Economics Are Compelling, But Obstacles Exist

$0

$10

$20

$30

$40

$50

$60

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

CT Wholesale #2 Heating Oil

Henry Hub + Tport

CT Wholesale Propane

No

min

al $

/MM

Btu

Difference increases from $9 to $28 per

MMbtu

Price Differential Forecast $ per MMBTU

Estimated Heating Conversion Economics

Type Customer Costs

Service already available

~$7,500 for heating retrofit

Service not available, but near gas system

~$7,500 for retrofit

~$1,000 - $3,000 for service and meter

Service notavailable, line extension required

~$7,500 for retrofit

~$10,000 - $15,000 for service, meter & line extension

Frequent Conversion Obstacles

• No local gas service in place

• Upfront customer capital with long paybacks

• Requirements for upfront customer payments on utility portion of expansion given a “pay as you go” regulatory philosophy

Price differentials, can lead to homeowner savings of $1,000 - $1,500 per year

12

Three Legged Stool: All legs must be present for success

REGULATORY CHANGES

CUSTOMER INVESTMENT INCENTIVESUTILITY INVESTMENT

INCENTIVES

Incent customers to make ~$7,500 conversion in

their home heating systems

1. Enable more expansion capital to be built into rates while managing rate increases

2. Develop way for new gas customers to pay contribution over time instead of up front

3. Support LDCs to forward procure firm pipeline capacity in advance of load

Create mechanism(s)

for LDCs to earn a fair return on

discretionary capitalLeverage Public Resources to reduce investment hurdles

13

Yankee Gas Initiatives to Meet Customer Needs

• Waterbury-to-Wallingford/LNG project completed November 2011

o Project completed at cost of $54 million; $3.6 million under budget

• Improves reliability, fills gaps in supply portfolio and eliminates system constraint in Cheshire area

• Increases vaporization capacity of Waterbury LNG plant

• Supports area’s growing customer demand

Improving Infrastructure:Distribution Integrity Management Program (DIMP)

• 82% of Yankee Gas’ distribution system is constructed of state-of-the-art plastic and cathodically protected steel pipe materials

• Continuing efforts to replace remaining 18% - cast iron and bare steel pipe

• Increasing annual spending from $15 million to $40 million to accelerate replacement program – approved in 2011 rate case

14

15

Yankee Gas Projected Capital Expenditures

$29

$48 $50 $50 $52 $54

$36

$27 $27 $28 $29 $30$18

$20 $20 $21$22

$26 $26 $13

$28 $23

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

$140

$150

2011 Proj 2012 2013 2014 2015 2016

Aging Infrastructure Basic Business

Peak Load/New Business Gas Supply InfrastructureWWL

$111

$125$116

$107

$123

$95

In

Mill

ion

s

2012-2016 Projected Yankee Gas Capital Spending$566 Million