Leveraging Natural Gas Supply for Maximum Benefit Restructuring Roundtable Jim Robb/Bob Coates

1. Leveraging Natural Gas Supply for Maximum Benefit Restructuring Roundtable Jim Robb/Bob Coates April 30, 2010

2. Key Messages • We believe that shale gas will significantly transform North America gas supply into a new era • Adequate supplies • Advantaged pricing versus fuel oil (price and volatility) • Lower CO2 emissions per BTU than competing fossil fuels • Key policy question – what’s our objective? • Reduce CO2 emissions (overall or from power sector?) • Reduce dependence on foreign oil • Provide total energy solution for our customers • We believe policies which encourage the use of incremental gas supplies in space heating applications represent the best environmental and economic policy for New England.

3. Three fourths of New England’s carbon emissions are concentrated in three sectors Carbon Emissions in New England Millions of tons of CO2 per year 27% Millions of tons of CO2 per year Convert oil-based heating to natural gas or electric heating 73% i) Reduce traditional electricity consumption ii) Displace fossil generation with low carbon generation Successfully commercialize electric vehicles Source: Environment Northeast.

4. Overall, New England’s power generation fleet is one of the “cleanest” in the United States. Average CO2 Emissions rate (Lbs CO2/mwh) generated Source Data: www.EPA.gov/egrid

5. New England Generation Mix New England’s low CO2 emissions profile driven by fuel mix (40% gas and 45% non emitting fuels) • New England already has substantial dependence on natural gas as a generation fuel • New England has little need for additional generation for reliability purposes • New capacity additions for New England really should focus on development of renewables to meet state mandates Coal Oil Renew. Gas Hydro Nuclear

6. However, emissions from space heating is high in New England due to our dependence on fuel oil Census Division ME CT NH VT RI MA PA NY NJ MD VA WI MN NC OH Source: EIA data from 2003. Note: Excludes emissions from fuel delivery trucks.

7. Converting fuel oil customers to gas could reduce CO2 emissions by 30-40%; fuel cost savings could be over $1800/year for an average homeowner CO2 emissionsCO2 lbs for a standard 2,300 sq. ft home 27% reduction 38% reduction Total kWh consumption 3,382 2,836 2,561 Other fuel consumption 867 gallons of oil 1,164 therms of gas 959 therms of gas Total Fuel Cost per year $ 3010/year $1545/year $1342/year

8. An incremental BTU of gas is better utilized in space heating than in power generation CO2 Savings from Fuel/Technology Switching Using incremental gas in space heating would reduce carbon emissions more than in power generation and would reduce petroleum usage as well -- a better environmental, economic, and fuel security result! *Fuel Oil conversion to natural gas for residential heating **Considers improved combustion efficiency only; savings potentially offset by higher utilization

9. What we believe needs to happen • Natural gas should be embraced as a reliable, domestically available fuel supply • Fundamentals suggest gas priced advantageously to petroleum in the future with lower volatility than we have recently experienced • Given New England’s relatively clean power generation mix and relatively “dirty” space heating fuel mix, encouraging the expansion of gas availability to homeowners makes good policy sense from both environmental and economic perspectives