NIMO TSC Customer Meeting June 29, 2009 Syracuse

2 First Annual Update  Section 9.4 of the Tariff requires an annual update to recalculate NIMO’s revenue requirement (RR), system control and dispatch (CCC), and billing unit (BU) components of the NYISO TSC formula rate by June 14 th for each upcoming year.  Section 9.4(b)2 of the settlement requires NMPC to hold a customer meeting within 30 days of the Publication Date. The purpose of the meeting is to explain the Update, to respond to questions to the extent possible, and for Interested Parties to identify concerns, to the extent known.  The First Annual Update Publication Date is June 11, 2009.

3 Background: TSC formula Wholesale TSC = {(RR / 12) + (CCC /12) + (LTPP / 12) – SR – ECR – CRR – WR-Reserved}/ (BU/12) RR = Revenue Requirement CCC= Scheduling, System Control and Dispatch Costs LTPP= Net LBMP Transition Period Payment SR= Direct Sale by the TO of Original Residual TCCs ECR= TO Net Congestion Rents CRR= TO Congestion Payments WR= Wheels through and Export Transactions Reserved= TO Congestion payments received per Section 2.3 of Attachment N BU= TO Billing Units (MWh) Today’s discussion focuses on these three specific components.

4 Component Comparison Delta Historical$238.0M (2007) Forecast$10.5M (2008) Historical/RR$262.4M (2008)$248.5M$13.9M Forecast$12.7M (2009)$12.7M True-up $4.5M RR$279.7M$248.5M$31.2M CCC$6.1M$5.5M$.6M BU - MWH37.0M37.5M(.5M) Indicative rate$7.73$6.78$.95 =

5 Annual True-up Delta RR$262.4M$248.5M $13.9M CCC$6.1M$5.5M $.6M BU - MWH37.0M37.5M.5M Indicative rate$6.78 BU * Indicative rate$3.4M Total True-up $17.9M Times 50% & 50% $ 4.5M Interest.05M Total True-up $4.5M =

6 Factors Affecting Historical RR increase  Investment Base-$.9M  Debt Rate$7.3M  O&M Expense$2.2M  A&G Expense$3.3M  Revenue Credits & Rents$1.3M  Other$0.7M  Total $13.9M

7 Increase in Investment Base Delta Transmission Plant$1,663.2M$1568.2M$95.M General, Common, Intangible$82.8M$82.4M$.4M Total Plant$1,746.M$1650.6M$95.4M Accumulated Depreciation-$571.4M-$561.1M-$10.3M Accumulated Deferred Taxes-$174.2M-$156.3M-$17.9M Regulatory Assets$ 25.5M$30.0M-$4.5M Other$ 17.7M$17.9M-$.2M Total$1,043.6M$981.1$62.5M Plant Additions Forecasted for 2008 = $72.M Actual 2008 Plant Additions =$106M, Retirements & Transfers= $10.6M

8 Plant Additions  Clay Station  EDIC New Scotland  Huntley Capacitor banks  New Gardenville  Harris Road substation

9 Impact of 2008 Investment increase Delta Net Investment Base$1,025.9M$963.2M$62.7M Other$17.7M$17.9M-$.2M Total Investment Base$1,043.6M$981.1M$62.5M 2007 WACC12.54% Due to Investment Base increase$130.81M$122.99M Forecasted Tx Plant Additions$ 8.66M $130.81M$131.65M-$.9M

10 Impact of Debt Rate increase Delta LTD7.44%5.99% Preferred.46%.44% Equity11.5% LTD weighted rate3.68%2.97%.71% Preferred weighted rate.02 Equity weighted rate5.75 Federal tax gross up3.11% State tax gross up.678%.688%-.01% WACC increase.70% Times 2008 Investment Base$1043.5M$7.3M $600M of 7.75% Senior Notes matured 10/08, interest expense declined $9.3M

11 Operation and Maintenance Delta Transmission Operation$26.2M$25.3M$.9M Transmission Maintenance$35.1M$32.0M$3.1M Mid Year Trend Adjustment$ 1.8M$-1.8M Total Transmission O&M$61.3M$59.1M$2.2M Increased due to increased maintenance program. National Grid met it’s reliability standards in 2008.

12 Administrative and General Expenses Delta Total A&G$36.2M$31.0M$5.2M Deductions$16.0M$12.5M$3.5M Subtotal$20.2M$18.5M$1.7M Plus Pensions$23.1M$21.6M$1.5M Total$43.4M$40.1M$3.3M A&G Increases Salaries$.86M Office Supplies$1.12M Regulatory$.25M.

13 ZONE DELTA% 112,221,276 12,434, , % 27,481,174 7,584, , % 34,600,228 4,506,748 93,4802.1% 410,627,10610,777, , % 292,045,630 2,081,644-36, % , ,277-88, % Total37,686,60038,184, , % Billing Units - MWH Most zones experiencing an economic decline Zone 3 increase due to US Army - Fort Drum, and Newton Falls Fine Paper

14 Other Business  A final Order in Docket No. ER accepting the proposed settlement was issued June 22,  Refunds will be made no later than July 15th  “Phase-in” period ended June 30, 2009 Partial Year Rate Effective January 1, 2009 – June 30, 2009 = 5.69 RR CCC BU $201,065,318 5,001,254 36,247,418

15 Questions