Gas Infrastructure and Deliverability in New England

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1 Understanding Our Energy Distribution Systems: Gas Infrastructure and Deliverability in New England Richard Levitan, March 5, 214

2 Agenda Price Discovery During the Polar Vortex New England s P/L Infrastructure Marcellus shale E&P impact on supply / deliverability Decline in gas portfolio diversity -- pipeline economic obsolescence Reduced LNG Imports Potential infrastructure expansion efforts 1

3 Next Day Strip Prices, January 214 Price ($/MMBtu) Price ($/MMBtu) 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19 1/2 1/21 1/22 1/23 1/24 1/25 1/26 1/27 1/28 1/29 1/3 1/31 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19 1/2 1/21 1/22 1/23 1/24 1/25 1/26 1/27 1/28 1/29 1/3 1/31 (High, Low, Weighted Average) 15 Transco-Z6 (NY) TZ6 (non-ny) is VA/MB border to Linden, NJ TZ5 is GA/SC to VA/MD border 15 Transco-Z6 (non-ny) Source: ICE

4 Next Day Strip Prices, January 214 Price ($/MMBtu) Price ($/MMBtu) 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19 1/2 1/21 1/22 1/23 1/24 1/25 1/26 1/27 1/28 1/29 1/3 1/31 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19 1/2 1/21 1/22 1/23 1/24 1/25 1/26 1/27 1/28 1/29 1/3 1/31 Price ($/MMBtu) Price ($/MMBtu) 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19 1/2 1/21 1/22 1/23 1/24 1/25 1/26 1/27 1/28 1/29 1/3 1/31 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19 1/2 1/21 1/22 1/23 1/24 1/25 1/26 1/27 1/28 1/29 1/3 1/31 (High, Low, Weighted Average) 15 Algonquin Citygates 15 Chicago Citygates TETCO-M3 15 Dominion-South Source: ICE

5 Chokepoints Across the Supply Chain into the NYFS January 6-7, January 21-23, 214 Force majeure, 1/7 4 Source: Pipeline EBB Critical Notice postings

6 Pre-Shale and Post-Shale Gas Flow Patterns Pre-Shale Flow Patterns Post-Shale Flow Patterns 5

7 Wet and dry shale gas production Major Dry Gas Production Area Major Wet Gas Production Area 6 Sources: EIA, Pennsylvania State University Marcellus Center, Dominion Resources, Pennsylvania Department of Conservation and Natural Resources

8 Oct-8 Jan-9 Apr-9 Jul-9 Oct-9 Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Marcellus Production (Bcf/d) Radical Change in Traditional Flows Shale gas fundamentally altering traditional flows Long haul transportation from WCSB obsolete Marcellus gas supplanting gas from GoM and Canada Declining Sable Island production, uncertainty around 12 Deep Panuke Reversal of flow through New York / Ontario LNG imports limited to contract quantities, periodic arbitrage Flexible cargoes to EU or Asia Source: Bentek Energy 7

9 Interstate Pipelines Operating in New England Algonquin Granite State Iroquois M&N PNGTS M&N/PNGTS Joint Facilities Tennessee Interstate-Served Generator LNG-Served Generator LDC-Served Generator 8

10 Interstate Pipelines Operating in New York Algonquin CNYOG Columbia Dominion Empire Iroquois Millennium NFG Tennessee Texas Eastern Transco Bluestone Gathering Laser Gathering Interstate-Served Generator Intrastate-Served Generator LDC-Served Generator 9

11 LNG Import Terminals in New England Mystic 8&9 Boston Algonquin M&N Tennessee LNG-Served Generator LNG Import Terminal National Grid Service Territory 1

12 Northeast LNG Imports LNG Imports (Bcf) 25 Distrigas Canaport Source: DOE Office of Fossil Energy, NEB

13 Decline in East-End Supplies Distrigas Sendout to Algonquin (MDth/d) LNG Imports (Bcf) Distrigas LNG Imports Distrigas Sendout to Algonquin Algonquin Receipts from M&N Source: DOE Office of Fossil Energy, Spectra Energy

14 Constraints on West-End Supplies Natural Gas Volume (MDth/d) Jul-9 Oct-9 Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Algonquin Southeast Compressor Station (NY/CT Border) 1,6 1,4 1,2 1, Capacity Throughput 2 13 Source: Spectra Energy

15 LNG Facilities in New England Augusta Concord Boston Portland Algonquin Granite State Iroquois M&N PNGTS M&N/PNGTS Joint Facilities Tennessee LNG Import Terminal LNG Satellite Tank Springfield Hartford Providence New Haven 14

16 LDCs Serving New England Generators Algonquin Granite State Iroquois M&N PNGTS M&N/PNGTS Joint Facilities Tennessee Bangor Gas Berkshire Gas Columbia Gas of MA Connecticut Natural Gas Maine Natural Gas National Grid (Boston Gas) National Grid (Colonial Gas) National Grid (Narragansett) Southern Connecticut Gas Yankee Gas LDC-Served Generator 15

17 M&N Pipeline Facilities Maine New Hampshire Algonquin Granite State M&N PNGTS M&N/PNGTS Joint Facilities Tennessee Compressor Station Interstate-Served Generator 16

18 Tennessee Pipeline Facilities in New England Algonquin Tennessee Granite State Compressor Station Iroquois Interstate-Served Generator M&N M&N / PNGTS Joint Facilities 17

19 Concluding Thoughts Loss of New England s P/L portfolio diversity heightens economic and operational risks High basis and volatile gas prices likely here to stay until pipeline enhancements alleviate congestion along traditional pathways into the region Existing ISO wholesale market design does not induce genco commitments for firm transportation Bulk power security during the winter is derived largely from oil Many oil generation plants at the local level are at-risk for retirement Combined cycle, gas turbine, and steam turbine generators on oil cannot sustain the provision of ancillary services 18