NEPOOL Participants Committee Boston, MA October 1, 2004

1. NEPOOL Participants Committee Boston, MA October 1, 2004 Stephen G. Whitley Senior Vice President & COO

2. Agenda • System Operations • Market Operations • Cold Snap Task Force • Winter 2004/2005 Outlook • Back-Up Detail

3. System Operations

4. Operations Highlights • Boston & Hartford Weather Pattern: • Temperatures were near normal with double the normal precipitation during September due to two (2) tropical storms. • Peak load of 20,829 MW at 20:00 hours on September 9, 2004. • During September: • NPCC Shared Activation of Reserve Events: • September 1 L/O Indian Point #2 1050 Mw • September 9 L/O Salem #2 1150 Mw • September 15 L/O Mystic # 8 & 9 1350 Mw • September 24 L/O Indian Point #2 950 Mw • Minimum Generation: • September 7, 19, 20 and 21.

5. Market Operations

6. Day–Ahead & Real-Time Prices, ISO Hub:

7. Congestion Component LMP Marginal Loss Component Day-Ahead–LMP Average by Zone & Hub: September 1, 2004 to September – 22, 2004 (-13.73%) (-5.93%) (-0.76%) (2.56%) (-1.47%) (-1.86%) (-1.09%) (-1.19%)

8. Congestion Component LMP Marginal Loss Component Real-Time-LMP Average by Zone & Hub: September 1, 2004 to September – 22, 2004 (-13.07%) (-6.55%) (-1.54%) (2.83%) (-1.28%) (-1.67%) (1.91%) (-1.12%) 97.4%

9. Day-Ahead Market vs. Forecast Load

10. Day-Ahead LMP

11. Real-Time LMP

12. Settlement Data – Real-Time & Balancing Market Percentage of Real-Time Load Fully Hedged Through ISO-NE Settlement System 80% 77% 75% 75% 75% 74% 73% 75% 73% 73% 72% 73% 71% 72% 70% 71% 71% 70% 70% 71% 70% 68% 65% % RT Load Fully Hedged 60% 55% 50% Jul-03 Jul-04 Apr-03 Apr-04 Oct-03 Jun-03 Jan-04 Jun-04 Feb-04 Mar-04 Aug-03 Sep-03 Nov-03 Aug-04 Sep-04 May-03 Dec-03 May-04 Apr 02 - Mar 03 Average Month Note: Partial Data (September 1-20, 2004)

13. RMR and Economic Operating Reserve Payments

14. Monthly VAR Support and SCR Payments

15. Real-Time Reliability Must Run Credits per Reliability Region August 2004 $600 $500 $400 Thousands $300 $200 $100 $0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 CT NEMA WCMA

16. Cold Snap Task Force

17. Cold Snap Three high-priority, short-term objectives targeted for implementation prior to winter 2004/2005: 1) Electric Market Synchronization with Gas Market • ISO & NEPOOL Cold Snap Task Force (CSTF) – Finalized proposal with NEPOOL MC & RC 2) Electric/Gas Operating Committee • Education, Understanding, Coordination, Communications 3) Investigate True Dual Fuel Capability & Promote Expansion • ESS Group – Environmental Consultants

18. Cold Snap, Con’t. 1) Electric Market Synchronization with Gas Market • Cold Snap Proposal is event driven, triggered by extreme weather (or by gas-side operational constraints) • Option A selected by NEPOOL MC

19. Cold Snap, Con’t. 2) Electric/Gas Operating Committee: • Three meetings held to date • Communications: Information transfer has Legal issues • Gas-Side: Antitrust & FERC Standards of Conduct • Electric-Side: NEPOOL Information Policy • ISO proposed Non-Disclosure Agreement • Coordination within four areas: • Maintenance: scheduled & unscheduled • Operations: contingencies, blackout/system restoration • Training: common-mode & emergency drills • Planning: contingency identification & analysis

20. Cold Snap, Con’t. 3) Investigate True Dual Fuel Capability & Promote Expansion • ESS Group = Engineering & Environmental Solutions • Compilation of environmental permits • Assess dual fuel constraints & limitations • Expansion strategies & feasibility analysis • Dialogue with New England Air Regulators • Site visits will determine real barriers 4) Other ISO Activities: • Obtained database of generators’ pipeline capacity contracts • Obtained access to pipelines electronic bulletin boards • New England-specific natural gas supply study

21. Cold Snap, Con’t. • Timeline • Define problem & key issues - Complete • Publish Interim ISO-NE Cold Snap Report - Complete • Prioritize issues & brainstorm solution sets - Complete • Present proposal options to stakeholders - Complete • Finalize proposal & Market Rule changes - October • Publish Final Cold Snap Report - October • Publish ISO Management Response - October • FERC Filing - TBD • Implement & test changes - Fall 2004 • EGOC weekly look-ahead meetings - Nov ~ Mar

22. Winter Outlook

23. Winter 2004-05 Capacity Assessment 50/50 Forecast December ’04 through March ’05 Conditions for Week of Lowest Operable Capacity Margin Week beginning January 8th MW Projected Peak (50/50) 22,370 Operating Reserve Required 1,700 Total Operable Cap. Required 24,070 Projected Capacity 33,610 Assumed Outages 6,600 Total Capacity 27,010 Operable Capacity Margin 2,940

24. Winter 2004-05 Capacity Assessment

25. Winter 2004-05 Capacity Assessment

26. Winter 2004-05 Capacity Assessment

27. Winter 2004-05 Capacity Assessment90/10 Forecast December ’04 through March ’05 Conditions for Week of Lowest Operable Capacity Margin Weeks beginning January 8th –22nd MW Projected Peak (90/10) 23,255 Operating Reserve Required 1,700 Total Operable Cap. Required 24,955 Projected Capacity 33,610 Assumed Outages 7,000 Total Capacity 26,610 Operable Capacity Margin 1,655 Assumed outages are based on Jan. 2004 Cold Snap experience (9,000 MW of total outage) adjusted for 2,000 MW of capacity expected to be available as result of preliminary Cold Snap Initiatives.

28. Winter 2004-05 Capacity Assessment

29. Winter 2004-05 Capacity Assessment 90/10 Forecast

30. Winter 2004-05 Capacity Assessment

31. Back-Up Detail

32. Demand Response

33. Demand Response(as of September 28, 2004)

34. Demand Response, Con’t.(as of September 28, 2004) * SWCT assets are included in CT values and are not included in Total

35. New Generation

36. New Generation Update • No new resources were added in September. • Approximately 60 MW expected on line by the end of the year. • Status of Generation Projects as of September 27, 2004: No.MW In Construction 3 127.4 with 18.4 approval Not in Construction 7 1,417 with 18.4 Approval

37. RTEP

38. RTEP Update • RTEP04 Report • ISO BOD action anticipated mid October • Project Listing • Update to be discussed at October 6 Joint TEAC/RC teleconference as addendum to RTEP04.

39. Inter-ISO Update • Northeastern ISO/RTO Planning Coordination Protocol • Signed by ISO-NE and NYISO • Awaiting signature by PJM • Next Steps • Form Joint ISO/RTO Planning Committee. • Exchange system plans and SIS queues. • Initiate Inter-area Planning Stakeholder Advisory Committee.

40. Stage Description 1 Planning and Preparation of Project Configuration 2 Pre-construction (e.g., material ordering, project scheduling) 3 Construction in Progress 4 Completed RTEP Project Stage Descriptions

41. NSTAR 345 kV Transmission Reliability Project Status as of 9/28/04 Project Benefit: Improves New England reliability by addressing Boston Area concerns and increasing Boston Import Limit from 3,600 MW to approximately 4,500 MW. Expected Original Present Upgrade In-service In-service Stage Phase 1 Stoughton 345 kV Substation Jun-06 Jun-06 1 Stoughton - Hyde Park 345 kV Jun-06 Jun-06 1 Stoughton - K Street 345 kV #1 Jun-06 Jun-06 1 Phase 2 Stoughton - K Street 345 kV #2 Dec-07 Dec-07 1 Notes: - Siting review in progress; ruling due 4th quarter 2004. - Detailed engineering in progress. - Received conditional RC approval 7-29-04.

42. SWCT 345 kV Transmission Reliability Project Status as of 9/28/04 Project Benefit: Improves New England reliability by addressing SWCT concerns. Increases SWCT Import Limit from 2,000 MW to approximately 3,400 MW. Expected Original Present Upgrade In-service In-service Stage Phase 1 Norwalk 345 kV Substation Nov-05 Dec-04 2 Plumtree 345 kV Substation Nov-05 Dec-04 2 Norwalk - Plumtree 345 kV Nov-05 Dec-04 2 Associated 115 kV Line Work Nov-05 Dec-04 2 Phase 2 Beseck 345 kV Substation Dec-07 Jan-06 1 East Devon 345 kV Substation Dec-07 Jan-06 1 Singer 345 kV Substation Dec-07 Jan-06 1 Beseck - East Devon 345 kV Dec-07 Jan-06 1 East Devon - Singer 345 kV Dec-07 Jan-06 1 Singer - Norwalk 345 kV Dec-07 Jan-06 1 Associated 115 kV Line Work Dec-07 Jan-06 1 Notes Phase 1: - Siting review complete; appeal denied. - Detailed engineering in progress. - Modification may become necessary to mitigate harmonic resonance/transient overvoltage concerns. Notes Phase 2: - Siting review in progress, ruling due December 2004. - Modification may become necessary to mitigate harmonic resonance/transient overvoltage concerns.

43. Northeast Reliability Interconnect Project Status as of 9/28/04 Project Benefit: Improves New England reliability by improving inter-area transfer capability and eliminating various protection/stability concerns.

44. NWVT 345 kV Transmission Reliability Project Status as of 9/28/04 Project Benefit: Improves New England reliability by addressing NWVT concerns, bringing another source into the Burlington area.

45. Southern New England Reliability Project Status as of 9/28/04 Project Benefit: Improves New England reliability by increasing transfer limits of three critical interfaces, including Connecticut Import Limit

46. Transmission Siting Update • SWCT • Phase I • Received conditional approval from Connecticut Siting Council 2/11/04. • Phase II • ISO, NU and UI submitted the Reliability and Operating Committee (ROC) harmonics/overvoltage report on August 16. Study work continues and interim report scheduled for completion October 8. • Hearing scheduled for September 28 on East Shore Alternative. • BOSTON • New Boston 1 needed until NSTAR completes 345 kV Reliability Project from Stoughton to Hyde Park and K Street (2006 earliest) • Conditional 18.4 approval for the NSTAR 345 kV Transmission Reliability Project August 4, 2004. • Additional analysis of harmonics/transient overvoltage expected 4Q 2004. • Salem Harbor needed at least until NGRID North Shore upgrades (2006 earliest) • These units provide operating reserves for the current system as well as insurance for delays in transmission projects. • Long-term solution is functioning Resource Adequacy market to incent generation to locate in the most appropriate areas, with the ability to do gap RFP’s to address timing issues. • NWVT • State hearing process continues • Surrebuttal pre-file testimony submitted September 3 • Surrebuttal hearings held late September • Decision expected by January 2005

47. Compliance

48. 2004 Compliance Update • A4: Maintenance for Bulk Power System Protection • Responses to ISO-NE survey were required by 1/5/04. • Level 2 sanction was imposed on 3 Participants for failure to respond on time. • ISO-NE reported full compliance with this Standard to NPCC.

49. 2004 Compliance Update, Con’t. • A3-4.9: Generator Underfrequency Tripping • All Participants surveyed responded to the ISO-NE Survey • 3 Participants have generators with non-compliant trip settings • 2 are exempt (nuclear plants) • 1 will require that ISO-NE enforce compliance • A3-4.6: Underfrequency Load Shedding • All Participants surveyed responded to the ISO-NE Survey • ISO-NE reported full compliance with this Standard to NPCC

50. 2004 Compliance Update, Con’t. SANCTIONS • Level 1 – Letter from Director SP to the functional head of the Industry Participant with copy to NCWG • Level 2 – Letter from COO to the Chief Executive of the Industry Participant with copy to the relevant functional head, all NEPOOL Participants and NPCC • Level 3 – Letter from the CEO to the Board of Directors of the Industry Participant with copies to Level 2 recipients. Post on the ISO-NE Compliance Website. • Level 4 –Level 3 penalty with copies to State/Provincial regulatory agencies, FERC, DOE, State Governor and Legislators.