1. Bruce B. Henning Vice President, Energy Regulatory and Market Analysis Bruce.Henning@icfi.com Natural Gas in New England: Gas-Electric Interdependency in the Real World SNL Gas-Electric Coordination Webinar December 13, 2012

2. The following slides are a excerpted directly from the ISO-NE Study Presentation The full slide deck is available on the ISO-NE Website as is the Draft Study

3. Assessment of New England’s Natural Gas Pipeline Capacity to Satisfy Short and Near-Term Power Generation Needs ISO-NE Planning Advisory Committee Prepared by ICF International, LLC REVISED: May 15, 2012 Public Domain Presentation

4. 4 Introduction ISO-NE contracted ICF International to provide an assessment of the amount of natural gas supply available to satisfy New England’s gas-fired power generation through 2020. The analysis focuses on the availability of gas supplies during peak gas and electricity demand periods:  Peak winter day: when total gas demand is highest.  Peak summer day: when electricity demand is highest, but gas demand in other sectors is relatively low. The analysis considers two different power sector scenarios:  Reference case: assumes existing fleet continues to operate.  Repowering case: assumes that a designated amount of non-gas-fired electric capacity is replaced with new gas-fired technologies over time. INTRODUCTION ICF ISO-NE PAC Briefing

5. Objectives  Quantify the amount of natural gas supply available for New England, including pipeline capacity, LNG import capability, and regional peaking capabilities.  Assess the level of firm gas demand from all of New England’s local gas distribution utilities (i.e. gas LDCs).  Estimate the remaining natural gas supply for the electric sector, after satisfying the firm gas demands from regional gas utilities. – Pipeline gas supplies are based on firmly contracted capacities into New England. The impact of gas consumption in upstream regions (e.g., New York and Canada) was not considered in this analysis.  Calculate the gas demands for the electric sector for both the reference and repowering cases.  Determine the electric sector gas supply surplus or deficit by comparing the projected electric sector demands against the remaining gas supply capability for both the reference and repowering cases.  Estimate the electric sector surplus/deficit values for gas sector contingency cases. Note: Calculations done for both a winter peak design day and a summer peak day. 5 ICF ISO-NE PAC Briefing INTRODUCTION

6. New England Pipeline Capability  Six (6) interstate pipelines serve New England’s gas consumers Winter 2011/12 Pipeline System Contract Capacity (MMcf/d) 1.Algonquin Gas Transmission (AGT)1,087 2.Iroquois Gas Transmission (IGT) 220 3.Maritimes and Northeast Pipeline (M&N) 833 4.Tennessee Gas Pipeline (TGP)1,261 5.Portland Natural Gas Transmission (PNGTS) 168 6.Granite State Gas Transmission (GSGT) 119  With the exception of Granite State, all these pipelines provide transport from outside of New England into the region. – Granite State is receives all of its gas from within New England, and therefore is not counted toward the region’s in-bound gas pipeline capability.  Flows on the M&N Pipeline are partially dependant on imports into the Canaport LNG import facility. 6 ICF ISO-NE PAC Briefing SUPPLY ASSESSMENT

7.  The Vermont Gas System is not included in this analysis since it is a small system, isolated from the interconnected gas pipeline infrastructure available to the electric generation sector and the other gas LDCs in New England. – The Vermont Gas System is radially supplied through the Trans-Quebec-Maritimes (TQM) pipeline.  Three regional LNG import facilities, Distrigas, Neptune and Northeast Gateway, can receive LNG supplies via tanker. – The Distrigas facility is the only LNG terminal with dedicated supplies.  Roughly sixty different LNG peak-shaving and propane-air facilities augment gas transported by pipelines and imported LNG, mostly on the coldest of winter days. – Aggregate regional gas LDC LNG peak-shaving capability ~ 1,319,000 Dth/d – Aggregate regional gas LDC propane-air capability ~ 137,000 Dth/d Other Gas Supply Capability 7 ICF ISO-NE PAC Briefing SUPPLY ASSESSMENT

8. Caveats for the Pipeline and Gas Supply Assessment  This analysis includes 350 MMcf/d of estimated pipeline capacity expansion into New England. Algonquin’s AIM Project – the detailed specifications for this project have not yet been announced. In this analysis, it is assumed that AIM adds 200 MMcf/d of capacity into New England by November 2015, and an additional 150 MMcf/d (for a total of 350 MMcf/d) of capacity by November 2016. – The specific impacts of this project on pipeline capacity into New England are uncertain. It is possible that this project will not add capacity into New England and New England’s pipeline capacity will remain unchanged over time. – However, it seems reasonable to assume some additional pipeline capacity will be needed and added to serve incremental loads at gas utilities over time. See the growth in firm gas use by the gas utilities projected later on Slide 20. The amount of pipeline capacity assumed to be added in this analysis is below the LDC load growth change projected on that slide. 8 ICF ISO-NE PAC Briefing SUPPLY ASSESSMENT

9. Caveats for the Pipeline and Gas Supply Assessment  Adequate gas supplies are assumed to be available to make full use of the capacities included in this analysis possible on peak days, including sufficient supplies at LNG import facilities.  Additional gas supplies are possible over short periods of time due to line pack, but this is not considered within this analysis since this assessment does not address locational and/or intraday issues.  All LNG peak-shaving and propane-air facilities are assumed to be fully available on a winter peak day at 100% of their rated capacity. However, localized system constraints may impair full coincident use of the facilities. – It is likely that the gas utilities would fully utilize their subscribed firm pipeline capacity before relying on their LNG peak-shaving and propane- air facilities.  Some intraregional constraints have been investigated, but are assumed to be non-binding on pipeline capacities. The analysis assumes that the pipelines can fully satisfy all firm contracts. 9 ICF ISO-NE PAC Briefing SUPPLY ASSESSMENT

10. Power Generation Scenarios ScenariosReference CasesRepowering Cases Nominal Gas Demand Nominal gas demand from reference case (50/50) electrical demands. Same as reference case, but assumes repowering to natural gas. Reference Gas Demand Reference gas demand from extreme case (90/10) electrical demands. Same as reference case, but assumes repowering to natural gas. Higher Gas Demand Works off of the reference gas demand case and drives additional gas demand to cover a disruption to non-gas-fired capacity. Assumed high gas prices throttle down gas demand. Same as reference case, but assumes repowering to natural gas. Maximum Gas Demand Works off of the higher gas demand case and drives additional gas demand to cover a disruption to non-gas-fired capacity. Assumed low gas prices creates incentive for additional gas demand (this case yields the highest levels of gas demand over time). Same as reference case, but assumes repowering to natural gas. 10 ICF ISO-NE PAC Briefing POWER GENERATION SCENARIOS

11. 11 Projected Electric Sector Gas Demands – Winter Peak Day 1,000s of Dth/d POWER GENERATION SCENARIOS ICF ISO-NE PAC Briefing

12. 12 Projected Electric Sector Gas Demands – Summer Peak Day 1,000s of Dth/d POWER GENERATION SCENARIOS ICF ISO-NE PAC Briefing

13. 13 Projected Electric Sector Gas Supply Surplus/Deficit Winter Peak Day SURPLUS/DEFICIT ANALYSIS ICF ISO-NE PAC Briefing

14. 14 Projected Electric Sector Gas Supply Surplus/Deficit Summer Peak Day SURPLUS/DEFICIT ANALYSIS ICF ISO-NE PAC Briefing

15. Observations Regarding Electric Sector Surplus/Deficit Results for Reference and Repowering Cases  New England’s gas delivery system is in much tighter balance on a winter design day than it is during a summer peak day.  The projected winter design day surplus/deficit is generally between -400,000 (-1,700 MW) and -750,000 dekatherms (-3,100 MW) per day – With Maximum demand, the deficits reaches -1,400,000 dekatherms (-5,800 MW) per day by 2019/20.  Available supplies on the winter design day are consistently below the imputed fuel reserve margin. – The regional gas delivery system is in very tight balance on a winter design day even before any gas sector demand growth is assumed. – This result suggests that regional gas supply capability is inadequate to satisfy regional electric power gas demands on a winter design day over the next decade, barring incremental expansion of the gas delivery system beyond those expansions assumed herein.  The projected deficits in gas supply apply only to the power sector; gas supply capabilities are adequate to meet non-power, firm gas demand. 15 ICF ISO-NE PAC Briefing SURPLUS/DEFICIT ANALYSIS

16. Observations Regarding Electric Sector Surplus/Deficit Results for Reference and Repowering Cases (Continued)  The summer peak day is not as tight and usually above the fuel reserve margin. – This conclusion will not necessarily remain true with gas sector maintenance, outages or contingencies being considered. – Summer peak day surpluses range from about 300,000 (1,250 MW) to 800,000 dekatherms per day (3,300 MW). – However, for 2013 through 2016, available gas supplies are at or below zero (in deficit) under Maximum demand conditions.  The Repowering cases generally increase gas use over their counterpart Reference cases, reducing surpluses and/or increasing deficits by between 50,000 (200 MW) and 200,000 (800 MW) dekatherms per day. – This result suggests that the regional gas delivery system will become even more tightly balanced on a winter design day under the Repowering scenario, and in need of additional gas supply capability beyond the amounts estimated herein. 16 ICF ISO-NE PAC Briefing SURPLUS/DEFICIT ANALYSIS

17. Caveats for Electric Sector Surplus/Deficit Estimates The results provided herein suggest that the regional market will be in tight balance on a winter design day. It is worth noting that it may be difficult for the market to balance even with slim surpluses in regional gas supply. –There may be localized constraints that will make it difficult for the gas market to balance. –There may be intraday changes in gas demands that create transient pressure changes on the pipelines, that make it difficult for the pipelines to operate within acceptable ranges. Intraday and hourly issues with gas use have not been studied herein. –Flow restrictions (OFOs) tend to become more frequent when pipelines are highly utilized. That is, there is less flexibility to respond to market need. –Interruptible transportation services are not likely to be available with such tight conditions. In short, the margin for error is much less. 17 ICF ISO-NE PAC Briefing CAVEATS

18. Gas Supply Developments since the ISO-NE Study was Released Bruce B. Henning December 13, 2012

19. © 2012 ICF International. All rights reserved.19 Natural Gas Delivery into New England

20. © 2012 ICF International. All rights reserved.20 LNG Supplies are being bid away from New England Comparison of Indicative Prices for LNG to Gas Prices in New England (U.S. Dollars per MMBtu)

21. 21  As of earlier December, initial gas flow from Deep Panuke was anticipated sometime during the winter season.  On November 15, it was announced that flow would be delayed “at least six months until the middle of 2013.” – Platform operator SBM Offshore said in a press release Thursday that the delay is due to “recent test findings related to processing equipment.  The delay will result in a short-fall of connected supply from offshore Canada and contracted LNG on the Maritimes and Northeast pipeline. – M&N requirements will have to be met with receipts of gas from PNGTS and other interconnects in N.E. Deep Panuke Project Delayed (Again)

22. Natural Gas in New England  If there is normal or colder than normal weather, gas delivery capacity will be tight into New England. – Gas Local Distribution Companies with firm transportation contracts into the region should receive their gas supply for their customers and be somewhat insulated from movements in spot market prices.  Pipelines may not be able to serve all of the electric generation load requesting interruptible service.  ISO-NE is increasing “out of merit order” dispatch to reduce the requirements for gas generation.  If generators attempt to operate using unauthorized overruns, pressure problems on the pipelines could affect all customers. © 2012 ICF International. All rights reserved. 22