1. Yes, We Believe So, But New Capacity Will Be Needed (And Several Projects Are in the Pipeline) Massachusetts Electric Restructuring Roundtable February 16, 2001 Thomas M. Kiley, President The New England Gas Association Will There Be Enough Gas to Fully Support Electricity Generation in New England?

2. The Report uWith so much generation in the region choosing gas, addresses impact on gas and electricity systems uEnergy systems are increasingly linked –Study raises questions about infrastructure for multiple systems – electric, gas, oil – and how they inter-relate uAgree that additional pipeline capacity will be needed to meet future power generation demand uNeed for ongoing communication – as in this forum today and others

3. NEGAs Discussion Points Today u Studys assumptions on pipeline capacity do not include several proposed system enhancements – undervaluing likely pipeline capacity growth u Uncertain of studys assumptions about total electric system capacity u Dismayed by misimpressions conveyed about gas shortages

4. Daily pipeline capacity today is about 3.6 billion cubic feet per day (Bcf/d). In last 3 years, pipeline capacity has grown by 800,000 MMCf/d, or 29% Regions Pipeline Capacity Growth

5. New Pipeline Supply - PNGTS Completed February 1999 292 miles of 24 and 30 pipe, U.S. side Interconnects with TransCanada system $500 million investment Initially 178 MMcf/d; now 230 MMcf/d

6. New Pipeline Supply – Maritimes & Northeast Completed December 1999 205 miles of 24 and 30 pipe, U.S. side Supplies from Sable Offshore $1.2 billion investment, total pipeline 400 MMcf/d

7. New Supply Project – Atlantic LNG New $1 billion liquefaction plant, Trinidad & Tobago First deliveries to New England, May 1999 For calendar year 2000, as of 9/00, Distrigas had imported 60 Bcf from Trinidad, 11 Bcf from Algeria 240 MMcf/d Growing interest in LNG by many companies

8. Distribution System Growth Continued investments by LDCs in system expansion & maintenance New pipelines mean new service areas 2 new LDCs in Maine

9. u Distrigas of Mass. Everett marine terminal u 1999 imports: 96 Bcf, more than double 98 levels u 3.5 Bcf of storage u Interconnections to Algonquin & Tennessee systems u Recently increased systems daily vapor sendout to 450,000 MMBtu/d u LNG provides about 25% of regions peak day supply u New contracts with power plants Distrigas LNG Terminal

10. ME NH VT MA CT RI Vermont Gas System Portland Natural Gas Transmission System Maritimes & Northeast Pipeline Iroquois Gas Transmission System Tennessee Gas Pipeline / El Paso Algonquin Gas Transmission / Duke The Regional Transmission System Cabot LNG / Distrigas Miles of pipe: Transmission – 1,879 Distribution – 32,120

11. ME NH VT MA CT RI Androscoggin Energy, Jay, 157 MWs Maine Independence, Veazie, 520 MWs Bucksport Energy, 174 MWs Rumford Power, 265 MWs Berkshire Power, Agawam, 276 MWs Tiverton, 265 MWs Recent Gas Power Plants on N.E. Grid Bridgeport, 540 MWs Dighton, 178 MWs Over 2,300 MWs of new generation has been added

12. New Capacity Will Be Needed u Over 20,000 MWs of new units are proposed in the region, according to ISO listing u Report considers bandwidth of 7-11,000 MWs of new gas units in 2001-2005 timeframe u To meet new load demand, report states that new gas pipeline capacity will be needed. NEGA concurs. u Report includes in its modeling analysis several proposed projects but not others. This assumption is key. NEGA believes these others projects are likely and will contribute both to meet supply needs and help alleviate system bottlenecks as identified in the report.

13. Proposed Enhancements, New England / New York Systems, 2002- 2003 Duke / Algonquin: HubLine Islander East (with KeySpan) Duke / Maritimes & Northeast: M&NE Phase III Expansion El Paso / Tennessee: Eastern Express New England Connecticut/Long Island Lateral Iroquois: Eastchester

14. Included / Not Included Included Tennessees Eastern Express 2000 (in 2001 model) Iroquois Eastchester (in 2003 model) Not Included Tennessees Eastern Express New England Dukes HubLine Maritimes & Northeasts Phase III Expansion See report pages vi-vii; 45-48. Also does not include Distrigas sendout capability in pipeline capacity (see p. ix).

15. Projects are Moving through the Process Now u The inclusion of several of these projects, as they proceed, will mean new supplies and increased capacity. u These projects are proceeding on schedule, as planned, under regulatory review. u Planned to meet market demand and conditions. u Timely approval is key. u Agree with report: Any facility improvement that results in increased liquidity at Dracut would likewise improve electric system reliability across New England (p. xi).

16. Uncertainty About Electric System Capability/Assumptions u Would be interested in further information on electric assumptions - missing sense of total electric system capability in 2003-2005: gas units are presented somewhat in a vacuum. u The issue of constraint on peak, Winter 2003: –What is the total system capability? –What is the status of non-gas units? –What is the assumption for units on scheduled maintenance/ unplanned outages, etc.? –What is the dispatch model/ process? –How much attrition of existing capacity occurs and when? –What about transmission ties: HQ, NB, etc.? u Reference gas: 2005 summer peak, 25,213 MWs, 2005 winter peak, 22,252 MWs (p. 34); High case: 2005 summer peak, 26,986 MWs, 2005 winter peak, 23,961 MWs (p. 34) u NEPOOLs projected net generating capacity for this summer, 2001, is 27,100 MWs, with forecasted peak of 23,650

17. Misimpressions Conveyed on Shortages & Crisis u Reports cover letter states: Against the backdrop of skyrocketing commodity gas costs and the power crisis in California, New Englands growing dependence on natural gas for power generation is genuine cause for concern (Levitan, 1- 29-01) u News reports in wake of ISO press conference of Feb. 5 conveyed sense of looming crisis in the region – and pending choice between gas heat and power. u The Boston Globe, 2-6-01: Study sees gas heat, electric shortages…Some New England consumers could go temporarily without heat or electricity during the winter of 2003 because the pipeline system may not be able to keep homes and power plants supplied with natural gas on peak winter days, according to a study released yesterday by the operator of the regions power grid. u This is incorrect.

18. LDC Reliability is Confirmed Report itself makes clear several times that LDC supplies to firm customers are not at risk: u When constraints arise, LDCs will be served as well as the minority of merchant generators who have lined up firm long- haul entitlements in their own name. Under the pipelines rigid scheduling priority systems, LAI does not envision the increased demand for natural gas for merchant generation having an injurious effect on the reliability of service for New Englands LDCs. (p. ix) u New Englands LDCs have nothing to worry about during times of constraint…[Gas] utilities remain obligated to serve. Therefore, gas utilities in New England cannot afford to roll- the-dice on the release of firm capacity rights when residential and commercial customers would otherwise be at risk. (p. 14)

19. Natural Gas & Power Generation u Natural gas is the fuel of choice for new generation in New England and the U.S. »Lower heat rate »Higher efficiency »Operating and maintenance performance »Lower emissions

20. Primary Energy Consumption, New England vs. U.S. (%) Source: U.S. Energy Information Administration

21. Changing Electric Generation Fuel Mix: 1980 - 1999 Source: ISO New England 1999: Gas is 16% of mix

22. Projected Gas Market Growth GTI projects 3.4% annual growth in New England over the next 15 years, led by electric generation Annual Growth Rate: Residential: 1.1% Commercial: 1.7% Industrial: 3.5% Electric: 7.4% Source: Gas Technology Institute (GTI)

23. Greater Communication u NEGA supports reports call for greater communication among energy systems u Last June NEGA held a workshop on gas power plants, looking at the issue of will there be enough gas? Participants included ISO NE, pipelines, Distrigas, LDCs, power generators, consultants, state government agencies u Consensus that supply will be there to meet need, assuming new pipeline capacity u Recommendation for greater communication on scheduling protocols, etc.

24. Summary uNatural gas industry has made substantial infrastructure investments in recent years in New England uStudys assumptions on pipeline capacity do not include several proposed system enhancements – undervaluing likely pipeline capacity growth uAgree that additional pipeline capacity will be needed to meet future power generation demand uMisimpression on shortages regrettable uNeed for ongoing communication