Regional Transmission Expansion Plan Massachusetts Electric Restructuring Roundtable October 28, 2004

1. Regional Transmission Expansion PlanMassachusetts Electric Restructuring RoundtableOctober 28, 2004 Jimmy Cross Vice President – System Planning ISO New England

2. About ISO New England • Private, not-for-profit corporation created in 1997 to oversee New England’s deregulated electric power system • Regulated by the Federal Energy Regulatory Commission (FERC) • Independent of companies doing business in the market • Independent board of directors, with no financial stake in regional energy firms • Approximately 400 employees headquartered in Holyoke, MA

3. Planning Process • ISO Role in Restructured Electric Industry • Provide ‘independent’ assessment of bulk power system needs • FERC granted ISO sole authority to lead planning effort (2000) • Stakeholder input from Transmission Expansion Advisory Committee • Regional Transmission Expansion Plan for 2004 • The most comprehensive planning effort to date to ensure system reliability and promote market efficiency • RTEP04 constitutes a regional ‘system’ plan • Objectives • Identify system needs • Provide information to the marketplace to attract generation, merchant transmission, and demand-response solutions • Identify regulated transmission solutions as a backstop for reliability

4. Planning Process New Generation Retirements/Deactivations Planning is Ongoing Load Forecast Transmission Projects Demand Response Program Demand-Side Management

5. Reliability Concern in “Load Pockets” • Areas with limited import capability and local generation • Southwest Connecticut • Connecticut • Boston • Northwest Vermont • Timely completion of 345 kV transmission upgrades to these areas is essential to address reliability concerns and to allow needed development of new resources. • Even with new 345 kV transmission, only a limited time for re-powering or developing new resources will exist. • Market incentives are needed to promote development of new resources.

6. System-Wide Resource Reliability • Present capacity ‘surplus’ will be short-lived. • New England supply outlook shifts from tight to deficit conditions in two to four years. • Some generation units needed for system reliability are “at risk.” • Potential retirements/deactivations include units in critical load pockets.

7. System-Wide Resource Reliability, cont. • New England is heavily dependent on gas-fired generation. • The 9,500 MW of capacity added since 1999 is largely gas-fired. • Approx. 11,500 MW of capacity is now capable of burning gas as a primary fuel. • Poses major concerns for unit availability during winter periods. • Region is vulnerable to price fluctuation, delivery constraints and competing demands for natural gas. • Cold Snap initiatives are underway to improve unit availability, and thus system reliability, during winter season.

8. 35,000 30,000 25,000 20,000 Summer Megawatts 15,000 10,000 5,000 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Net Generating Capacity 90/10 Load + Operating Reserves 50/50 Load + Operating Reserves New England’s Capacity SituationToday’s surplus capacity situation will be short-lived

9. Transmission Projects • Progress in Several Areas Since RTEP03 • Projects placed in service since RTEP03: 25 • Total New RTEP04 projects: 39 • Total RTEP04 projects needed for reliability: 246 • Major 345 kV Projects (Estimated costs) • Southwest Connecticut Reliability Project ($890M) * • Southern New England Reinforcement Project ($125M) • NSTAR 345kV Transmission Reliability Project ($217M) • Northwest Vermont Reliability Project ($156.3M) • Northeast Reliability Interconnect Project ($90.4M) • Subtotal: approximately $1.5 billion • Remaining RTEP04 Projects: approximately $0.6 billion • 2004 Transmission System Project Plan Grand Total: $2.1 billion * Additional equipment or expense may be required for underground design.

10. Market Information • New England needs a capacity market that appropriately values the location of resources. • RTEP04 provides historical market information and economic assessments of the system in the future. • Congestion component of energy pricing has been low.

11. Conclusions • Reliability is at risk in Southwestern Connecticut, the State of Connecticut, Northwest Vermont and Boston. • Problems in these areas could adversely impact the regional bulk power system. • Resource reliability could become a major system-wide issue for New England in two to four years. • Timely completion of transmission projects is critical. • Delays exacerbate reliability problems. • Implementation of actions identified in RTEP04 and enhancements to the market design are needed to address New England’s reliability concerns.

12. Questions?

13. Backup material

14. 12,000 10,000 8,000 Summer Megawatts 6,000 Emergency Actions Southern New England Reinforcement 4,000 Project CT Import Increase (900 MW) Current Import Limit (2,200 MW) Net Generating Capacity 2,000 90/10 Peak Load + Reserves (Largest Unit) 50/50 Peak Load + Reserves (Largest Unit) - NOTE: Transmission project in-service dates are subject to delay 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Connecticut Capacity Situation

15. 6,000 5,000 4,000 Summer Megawatts 3,000 Emergency Actions SWCT Reliability Project Phase II - Import Limit Increase (850 MW) 2,000 SWCT Reliability Project Phase I - Import Limit Increase (550 MW) Current Import Limit (2,000 MW) 1,000 Net Generating Capacity 90/10 Peak Load + Reserves (Largest Unit) 50/50 Peak Load + Reserves (Largest Unit) - NOTE: Transmission project in-service dates are subject to delay 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Southwest Connecticut Capacity Situation

16. New Haven Bridgeport Stamford Milford Norwalk Post-Contingency ViolationsCurrent System Thermal Overloads