Pat Wood III, Chairman

Federal Energy Regulatory Commission

New England’s Platform for Infrastructure Development

BostonSeptember 13, 2004

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 2

Stable platform for growth

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 3

Infrastructure status

Healthy generation supply

Needed closer to load

New gas supply needed

LNG facilities could satisfy this demand

Transmission improvements generally in progress

Need to ensure progress in certain areas

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 4

2000 2004

2000 2004

Other

Oil

Nuclear

Hydro

Coal

Gas

New England

New York

27,956

34,521(+ 23%)

38,018(+ 7%)

35,625

Source: RDI PowerDat.

New England generation capacity increased 23 percent from Jan. 2000 through May 2004

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 5

Large increase in gas-fired generation

NEPOOL Historic Generation Growth

0

10,000

20,000

30,000

40,000

50,000

60,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

MW

12%

18%

16%

13%

33%

8%

6%

7%8%

57%

13%

7%

COALNUCLEAR

HYDRO

OIL

GAS

OTHER

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 6

30

246 281 308 324193

198189

193 197

117

167163

169176

185

140141

143143

0

100

200

300

400

500

600

700

800

900

1993 2003 2005 2007 2008

Bc

f

Electric Generation Residential Commercial Industrial

Generation increased overall gas demand

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 7

Algonquin Gas Transmission Co.Iroquois Gas Transmission System, L.P.Maritimes & Northeast Pipeline, LlcPortland Natural Gas Transmission SystemTennessee Gas Pipeline Co.Joint Maritimes/PNGTS

0.25 Bcf/d0.4 Bcf/d

0.95 Bcf/d

0. 57 Bcf/d

0.03 Bcf/d

2.7 Bcf/d

No additional pipeline capacity is projected to serve the New England region through 2005. The last approved expansion of the DOMAC LNG facility will provide some additional LNG volumes.

Source: EEA’s April 2004 Base Case

Gas supply options limited

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 8

New England

Source: EEA’s April 2004 Data Base adjusted

0

0.5

1

1.5

2

2.5

3

3.5

4

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

Bc

f/d

Total Demand Pipeline Capacity

Demand close to pipeline capacity

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 9

Source: Compiled by FERC Staff

1

2

3

4

5

6

7

8 9 10

1211

1. Fall River, MA: 0.8 Bcf/d (Weaver’s Cove Energy)2. Somerset, MA: 0.65 Bcf/d (Somerset LNG)3. Providence, RI: 0.5 Bcf/d (KeySpan & BG LNG)4. Offshore Boston, MA: 0.8 Bcf/d (Northeast Gateway)5. Pleasant Point, ME: 0.5 Bcf/d (Quoddy Bay, LLC)6. Quebec City, QC: 0.5 Bcf/d (Enbridge/Gaz Met/Gaz de France)7. Riviere-Du Loup, QC: 0.5 Bcf/d (Cacouna Energy)8. St. John, NB: 1.0 Bcf/d (Irving Oil & Canaport)9. Point Tupper, NS: 1.0 Bcf/d (Access Northeast Energy)10. Goldboro, NS: 1.0 Bcf/d (Keltic Petrochemicals)11. Belmar, NJ Offshore: N/A (El Paso Global12. Logan Township, NJ: 1.2 Bcf/d (Crown Landing LNG-BP)

Planned Terminals

Existing Import LNG Everett, MA: 1.035 Bcf/d (Tractebel)

Potential LNG terminals may provide 8.5 Bcf/d by 2010

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 10

Transmission grid is strengthening

Orrington –

Point Lepreau

New Haven –

W. Rutland

Plumtree - Norwalk

Bergen - NY

Sayreville – New Bridge Rd.

New Scotland - NYC

Holbrook – K Street

Canal – Oak St

Middletown - Norwalk

Millbury - Card

Glenbrook - Norwalk

New Scobie - Tewksbury

Source: NERC ES&D 2003 version 1, NYISO Power Trends: New York’s Success & Unfinished Business, ISO-New England: NEPOOL Transmission System Project Listing and PowerMap.

345 kV Line

DC Line

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 11

Test of platform during cold snap

Gas and power systems delivered despite record low temperatures and record load

Gas capacity limits reached

Behavior was competitive

Gas moved from electric generation to retail heating based on price signal

Gas generation was not appropriately valued, and oil units could have been usedStress exposed a need for better market integration

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 12

ISO-NE Achieves the Wholesale Power Market Platform

Regional independent grid operation

Regional transmission planning

Fair cost allocation for new and existing transmission

Market monitoring and market power mitigation

Spot markets (real time and day ahead markets)

Transparent efficient congestion management

Firm transmission rights (financial rights)

Resource adequacy (capacity obligations and markets)

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 13

Market tests of the platform

SW Connecticut still stressedPricing/investment signal is distorted

NYC capacity prices > $100 per kW-year, but next door:

NE capacity prices < $2 per kW-year, including SW Conn

Which is the correct capacity value given their similar supply-demand balance?

Boston congestion largely resolvedProper pricing signals work

September 13, 2004 Pat Wood, III: Federal Energy Regulatory Commission 14

Further Progress Expected

1) Finalize RTO status

Independence

Tariff filing rights

Liability & indemnification

2) Regional State Committee (NESCOE)

3) Seams with NYISO Elimination of import/export fees with NYISO

Virtual regional dispatch

4) Resource adequacy