Agenda Natural gas and power markets overview Generation retirements and in developments Future resource mix including large hydro Balancing environmental, reliability and cost impacts 1
Northeast Utilities Electric Customers: 3M Gas Customers: 0.5M Utilities: CT Light & Power NSTAR Electric Public Service NH Western MA Electric NSTAR Gas Yankee Gas 2
Natural Gas: Shale gas keeping a lid on wellhead prices U.S. Shale Gas Production up ~500% in last 5 years, 40% of US dry gas production 3
Natural Gas: Increased Supply, Lower Prices Divergence in gas and oil prices makes fuel switching attractive, demand growth seen in industrial and large commercial segments. Source: EIA 4
Constrained Natural Gas Market Increased demand and constrained pipelines led to surge in prices and volatility during 2012/13 winter Similar pattern in place for 2013/14 winter Natural Gas ($/MMBtu) $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 New England Spot Prices AGT Citygate $5.00 $- 11/1/2012 12/1/2012 1/1/2013 2/1/2013 3/1/2013 4/1/2013 5/1/2013 6/1/2013 7/1/2013 8/1/2013 9/1/2013 10/1/2013 11/1/2013 12/1/2013 1/1/2014 ISO-NE Hub $250.00 $200.00 $150.00 $100.00 $50.00 Wholesale Power ($/MWh) $- 5
Constrained Natural Gas Market New England diverges sharply from North American natural gas market in winter $25.00 $20.00 2014 Natural Gas Futures $/MMBtu $15.00 $10.00 $5.00 $- Mar-14 Feb-14 Jan-14 Apr-14 Jun-14 May-14 Jul-14 Aug-14 Dec-14 Nov-14 Oct-14 Sep-14 Source: Bloomberg, 12/28/13 Henry Hub AGT Citygate 6
4Q2013 Run-Up in Natural Gas & Power Futures rose sharply in advance of latest winter season $20.00 2014 Winter NG Prices (Jan-Mar) $80.00 New England Wholesale Power Futures (All-hours, Annual, 2014) $18.00 $70.00 $16.00 $14.00 $60.00 $/MMBtu $12.00 $10.00 $8.00 $/MWh $50.00 $40.00 $30.00 $6.00 $4.00 $2.00 $- 9/3 9/17 10/1 10/15 10/29 Henry Hub 11/12 11/26 AGT Citygate 12/10 12/24 $20.00 $10.00 $- 9/3 9/17 10/1 10/15 10/29 11/12 11/26 ISO-NE Hub 12/10 12/24 Source: Bloomberg, 12/28/13 7
New England Gas Pipeline Expansion Three of five major pipelines serving New England have proposed incremental capacity into the region but most expansions have been to the West 8
Northeast Pipeline Expansions Approx. 1 BCFD incremental capacity to New York went into service on November 1, 2013 but none into New England yet 9
Boston Vs. New York Historical prices => daily settlement average, 2013-14W => ICE Forward Financial Basis 10
Global LNG Pricing Global LNG prices continue to maintain significant premiums to U.S. limiting imports to supply gas from East in New England Source: FERC 11
Power Generation Dash to Gas Nuclear 2000 New England Generation Mix 2012 (MWH) 31.7% Nuclear 31.2% Natural Gas 14.9% Natural Gas 52.8% Coal 18.3% Coal 3.2% Oil 22.3% Oil 0.2% Biomass 7.6% Biomass 5.4% Hydro 5.1% Hydro 5.8% Other 0.0% Other 0.3% Wind 0.0% Wind 1.0% Source: ISO-NE, Net Energy by Source 12
Power Generation Retirements and Additions ISO has identified 8,300 MW at risk (Dec. 2012 Study) Vermont Yankee (640 MW) and Brayton Point (1,500) retiring 6,300 MW needed to be replaced plus 2,889 MW of EE/DR by 2020 Potential Retirements Proposed Capacity Natural Gas 53.6% Biomass 4.2% Hydro 1.3% Solar 0.2% Wind 40.7% Source: ISO-NE 13
NE Generation Mix in Play Press Releases: June 17, 2013 Massachusetts, Connecticut, Maine, Rhode Island and Vermont, have launched a regional initiative to expand large hydro imports into New England December 5, 2013 - New England Governors Sign Energy Statement Committing Region to Cooperation on Infrastructure: Large hydro imports, renewable, CHP and natural gas Role of hydro power and natural gas is being hotly debated in New England Little agreement on how to finance these resources Lack of long term buyers for power since deregulation Generators unwilling to contract long term for gas transportation State mandates driving renewable generation mostly wind and solar 14
Demand for Renewables & Reliability Total Supply Required (GWHr) 23,000 21,000 19,000 17,000 15,000 13,000 11,000 9,000 Gap of 9 TWhr 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total NE Class I Demand (GWHr) Existing NE Class I Supply (2013) State Share of 2022 Total Renewable Demand CT Mass RI Maine NH Illustrative Example (by Technology) of Resources Needed to Fill Gap Nameplate (MW) Capacity Factor Generation Output Onshore Wind 3191 32% 9 Twhr Offshore Wind 2760 37% 9 Twhr Solar 7856 13% 9 Twhr Northern Pass 1200 85% 9 Twhr Estimated Annual New England RPS Compliance Costs (2022): - Annual Total Demand (19 TWhr) X ACP / Cost per MWhr ($55/REC) = $1 Billion 15
Renewable Interconnection Queue Majority of large scale renewable resources located in Northern NE Solar and other DG built closer to load centers with additional subsidies NU share long terms PPAs MA GCA I, 150 MW, 4 wind farms MA GCA II, 400 MW, 7 wind farms CT PA 13-303, 225 MW wind/solar CT LREC/ZREC, $0.8Bn, 200 MW NH 75 MW biomass 1,200+ MW 50 M W 60 M W 20 MW 250 MW 165 M W 50 M W 1,200 MW 730 MW 468 MW 850 MW Wind Hydro Solar/DG 16
Northern Pass Transmission 1200 MW HVDC link between Quebec and Deerfield, NH HQ funded project no cost to NE ratepayers Constructed by NU In service 2017 Interconnection approved by ISO-NE Benefits Lowers NE costs by $150M - $200M/Yr Reduced carbon emissions by circa 5M Tons/Yr Clean, non gas supply backed by vast hydro resources Compliments wind and solar integration 17
New Resource Alternatives for New England Search is on for the right balance in resource mix to reliably serve future energy needs Reliability Natural Gas Large Hydro Energy Efficiency Wind Environment Solar/DG Cost 18