ISO New England Regional Update Wholesale Electricity Markets & State Energy Policy Seminar Connecticut Business & Industry Association December 14, 2010

About ISO New England Not-for-profit corporation created in 1997 to oversee New England’s restructured electric power system –Regulated by the Federal Energy Regulatory Commission (FERC) Independent System Operator –Independent of companies doing business in the market –No financial interest in companies participating in the market Major responsibilities: –Reliable operation of the electric grid –Administer wholesale electricity markets –Plan for future system needs 2 CBIA Seminar – December 14, 2010 © 2010 ISO New England Inc.

New England’s Electric Power Grid at a Glance 6.5 million households and businesses; population 14 million More than 300 generators Over 8,000 miles of high-voltage transmission lines 13 interconnections to electricity systems in New York and Canada Approx. 32,000 megawatts of total supply and 2,500 megawatts of demand resources All-time peak demand of 28,130 megawatts, set on August 2, 2006 More than 400 participants in the marketplace $5-11 billion annual energy market value 3 CBIA Seminar – December 14, 2010 © 2010 ISO New England Inc.

ISO New England and Stakeholders 4 CBIA Seminar – December 14, 2010 © 2010 ISO New England Inc.

Transmission Projects to Maintain Reliability are Progressing Major transmission upgrades completed or underway in all six New England states Investments have reduced congestion and reliability costs –U.S. Department of Energy dropped New England from its transmission congestion report, citing success in developing transmission, generation and demand-side resources –Congestion costs dropped nearly 80% (~$100 million) from 2008–09 –The need to commit uneconomic generation for reliability dropped 90% (more than $165 million) from 2008–09 Largely because of transmission upgrades completed in Southeast Mass (SEMA) and Southwest Connecticut b In service Under construction Under study 8a 1.Southwest CT Phase I 2.Southwest CT Phase II 3.NSTAR 345 kV Project 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 9.Maine Power Reliability Program 10.Vermont Southern Loop CBIA Seminar – December 14, 2010 © 2010 ISO New England Inc.

New England’s Fuel Mix has Shifted New highly efficient natural- gas-fired generators have displaced use of fuel oil Generator emissions rates have declined over the past decade –SO 2 rate  67% –NO X rate  62% –CO 2 rate  12% Environmental regulations will further challenge carbon-heavy resources 6 CBIA Seminar – December 14, 2010 © 2010 ISO New England Inc.

Region has Developed DR to Support Reliability Additional DR could be realized by offering dynamic pricing to retail customers FCM  2010/11–2013/14: Total DR cleared in FCAs 1–4 (New and Existing); Real-Time Emergency Generation capped at 600 MW. 7 Enrollment in ISO programs prior to start of FCM CBIA Seminar – December 14, 2010 © 2010 ISO New England Inc.

Wholesale Electricity Prices Track Natural Gas Prices 8 CBIA Seminar – December 14, 2010 © 2010 ISO New England Inc.

Forward Capacity Market: Results Significant new supply and demand resources committed to be online in New England over the next four years* –New supply: 3,600 MW in New England (1,555 MW in CT) –New DR: 2,500 MW in New England (600 MW in CT) FCM resources eliminated need for costly reliability agreements with older, less efficient resources –In 2007, Connecticut paid $300 million for 3,200 MW of capacity operating under reliability agreements –Reliability agreements ended June 1, 2010 Capacity prices trending down due to excess supply –Forward Capacity Auction clearing at the floor price 9 * Resources committed in Forward Capacity Auctions 1–4 CBIA Seminar – December 14, 2010 © 2010 ISO New England Inc.

Consumer Liaison Group

ISO’s Activities Important to Consumers 24/7 Reliable electric service throughout the region for residents and businesses Operation and development of electric system infrastructure is expensive – and consumers ultimately pay for it Opportunities exist to participate in the process that decides the details of how operation and development of infrastructure will occur –Significant transparent information For certain consumers, opportunity to participate in the markets, earn revenues 11 CBIA Seminar – December 14, 2010 © 2010 ISO New England Inc.

Consumer Liaison Group Purpose –Inform consumers about complex and important electricity issues –Facilitate consumer involvement on regional electricity issues and their participation in the process to consider electricity market changes –Create a forum for dialogue between consumers and ISO New England Connecticut has active role –Kevin Hennessy (CBIA) and Richard Steeves (OCC) serve on CLG Coordinating Committee –Additional participation in CLG activities is welcome 12 CBIA Seminar – December 14, 2010 © 2010 ISO New England Inc.

Consumer Liaison Group Topics –Wholesale electricity pricing –Differences between wholesale and retail costs –Options for consumer participation in wholesale electricity markets –Transmission costs and cost allocation –Issues and challenges associated with integrating renewable resources –Discussions with FERC Commissioners Moeller and Spitzer 13 CBIA Seminar – December 14, 2010 © 2010 ISO New England Inc.