1. The Council of State Governments Eastern Regional Conference Gordon van Welie, President and CEO, ISO New England August 16, 2010 Portland, Maine

2. ISO New England’s Core Responsibilities Are Interconnected and Interdependent Operating the Power System Minute-to-minute reliable operation of region’s generation and transmission system Administering Wholesale Electric Markets Oversee region’s wholesale marketplace for energy, capacity and reserve supplies Power System Planning Ensure reliable and efficient power system to meet current and future power needs 2 CSG Eastern Regional Conference © 2010 ISO New England Inc.

3. 3 Regional Planning, Centralized System Operations, Competitive Markets Provide Benefits Expanded transmission development New generation and demand resources Generator availability improvements Economic and environmental benefits CSG Eastern Regional Conference © 2010 ISO New England Inc.

4. Transmission Projects Maintain Reliability $4 Billion invested since 2002, $5 Billion on horizon 4 4 5 1 2 7 9 8b 3 6 10 1.Southwest CT Phase I 2.Southwest CT Phase II 3.NSTAR 345 kV Project, Phases I & II 4.Northwest Vermont 5.Northeast Reliability Interconnect 6.Monadnock Area 7.New England East-West Solution 8.Southeast Massachusetts a.Short-term upgrades b.Long-term Lower SEMA Project 9.Maine Power Reliability Program 10.Vermont Southern Loop In service Under construction Under study DOE highlights progress in New England In the Energy Policy Act of 2005, Congress directed the U.S. Department of Energy to conduct a study every three years on electric transmission congestion and constraints. In its latest (2009) study, DOE dropped New England from its list of “Congestion Areas of Concern” citing the region’s success in developing transmission, generation, and demand-side resources. 8a CSG Eastern Regional Conference © 2010 ISO New England Inc.

5. Region Adding Efficient Generation Capacity FCM  ■ New Supply Cleared through FCA-1, 2, 3, 4 55 CSG Eastern Regional Conference © 2010 ISO New England Inc. Represents approximately 45% of 2013-2014 Installed Capacity Requirement

6. Strong Growth in Regional Demand Resources 6 FCM  2010-2014: Total DR Cleared in FCM 1, 2, 3, and 4 (Includes new and existing DR) DR totals include a cap of 600 MW on real-time emergency generation resources FCA 4 (2013/14) based on preliminary information Total DR Enrollment in ISO Programs prior to start of FCM CSG Eastern Regional Conference © 2010 ISO New England Inc.

7. Generator Availability Improvements Wholesale Markets provide strong incentives to improve resource availability 7 New England System Weighted Equivalent Availability Factors, % CSG Eastern Regional Conference © 2010 ISO New England Inc.

8. Electricity Prices Follow Natural Gas Prices Natural Gas represents approximately 38% and 42% of region’s capacity and energy respectively 8 CSG Eastern Regional Conference © 2010 ISO New England Inc.

9. Many Renewable Projects Proposed 3,400 MW of Renewables in ISO Queue, Majority Wind 9 Includes: Landfill Gas, Hydro, Wind, Solar and Biomass. Pump Storage projects in the ISO Queue are not included. Renewables in Queue By Fuel Type Renewables in Queue By State CSG Eastern Regional Conference © 2010 ISO New England Inc.

10. ISO Preparing Region to Integrate Wind Wind Integration Study –Model on- and off-shore wind capability –Recommend technical interconnection requirements –Assess operational impacts of varying wind scenarios –Target completion date – October 2010 Preliminary Observations –Region has large amounts of high quality wind potential –Regional wind variability is moderate and manageable –ISO has ability to manage and integrate significant amounts of wind power CSG Eastern Regional Conference © 2010 ISO New England Inc. 10

11. Governors 20-Year Renewable Energy Vision Accessing wind possible but requires investment States’ Blueprint as guiding policy and regulatory framework ISO economic study as technical support 11 CSG Eastern Regional Conference © 2010 ISO New England Inc.

12. Renewable Resources Remote from Demand 12 Wind zones Electricity Demand Population and electricity demand concentrated in southern New England Wind resources do not overlap with high demand areas Estimated transmission costs to access 5,500 MW of regional wind plus 3,000 MW of additional Canadian imports: ~$7 B to ~$12 B CSG Eastern Regional Conference © 2010 ISO New England Inc.

13. 5 1.HQ–New Hampshire Line HQ/Northeast Utilities/NSTAR 2.Northeast Energy Link Bangor Hydro/National Grid 3.Green Line New England ITC 4.Seabrook-Boston-Cape Cable NextEra Energy (formerly FPL) 5.Northeast Energy Corridor Maine/New Brunswick 6.Wind from the Midwest 7.Champlain Hudson Express Transmission Developers Inc. 8.Plattsburgh, NY–New Haven, VT 9.Interconnect Northern Maine 2 1 4 3 6 5 7 8 9 New Brunswick Nova Scotia Québec New York Transmission Projects Vying to Move Renewable Energy to High Demand Areas Representative Projects 13 CSG Eastern Regional Conference © 2010 ISO New England Inc.

14. Funding Transmission to Access Renewables Remains a Challenge Regional cost allocation methodology well-established and generally accepted for reliability projects No agreement as to how to pay for transmission built to access renewables –A regional and national issue Long-term Power Purchase Agreements (PPAs) could include the cost of energy and transmission –New England has begun exploring potential for coordinated procurement CSG Eastern Regional Conference © 2010 ISO New England Inc. 14

15. Coordinated Effort May Help Facilitate Regional Renewable Supply CSG Eastern Regional Conference © 2010 ISO New England Inc. 15 Excerpt New England States’ Committee on Electricity (NESCOE) report, July 2010 “Renewable power procurement could aggregate demand for renewable power and enhance buying power, stimulate the market for renewable resources; and provide value to renewable project developers by creating larger revenue streams than might otherwise be possible. Using cooperative competitive processes may, therefore, facilitate development in cost–effective, low- carbon renewable electric generation in and around the region.”

16. Coordinated Procurement Process Identifies Cost-Effective Projects Offers states the ability to broadly procure cost-effective renewables for consumers –Allows use of competitive procurement processes similar to what the states already utilize –Consistent with authority to site infrastructure, including multi- state transmission projects –Achieves state public policy objectives Focuses ISO planning efforts on broader integration of wind and other resources –Ensures technical feasibility Can help resolve cost allocation issues CSG Eastern Regional Conference © 2010 ISO New England Inc. 16

17. Federal Activity to Address Transmission Planning and Funding Department of Energy funds Eastern Interconnection Planning Collaborative (EIPC) Senate energy bill links planning, siting and cost allocation FERC issued Notice of Proposed Rulemaking (NOPR) to amend transmission planning and cost allocation –Transmission planners required to account for state and federal public policies in planning –Cost allocation methods for intra- and inter- regional projects to be based on beneficiary model CSG Eastern Regional Conference © 2010 ISO New England Inc. 17

18. Closing Thoughts … Region has benefited from a system that combines system planning, centralized operations and competitive markets New England has strong renewable potential –Developers proposing to build renewable generation, particularly wind –See http://www.iso-ne.com/nwsiss/grid_mkts/index.html for recent article “Where will New England’s electricity come from in 5, 10, and 20 years?”http://www.iso-ne.com/nwsiss/grid_mkts/index.html Funding transmission to access wind is the outstanding question – but coordinated procurement and regional cooperation may help –Consideration with New England stakeholders underway. CSG Eastern Regional Conference © 2010 ISO New England Inc. 18