1. 1 What is Operations Management @ NU 4 Distribution Companies $1,311M Cap 32,000 Interruptions 67,000 Trouble Calls 40,000 miles of infrastructure 2 + million customers Transmission CL&P & YG WMECo PSNH $428M Exp

2. 2 Diagram of Integrated Electric System Electric Generation Transformer 12,500 – 25,000v Transmission Lines 115,000 – 345,000 v Substation Industrial User 120 – 34,500 v Commercial User 120 – 480 v Residential User 120 - 240 v Distribution Lines 2,400 to 34,500 v

3. 3 Diagram of Integrated Gas System Gate

4. 4 Maintenance Operations Construction Engineering Design Planning Customer Service Key Macro-Level Operations Management Functions @ NU Many other support/logistics functions help make this work e.g…… Purchasing/inventory/stores Human Resources Accounting IT etc., etc.

5. 5 Key Operations Management Terminology Peak Demand (kW) Customer Usage (kWHr) Delivery Efficiency Delivery Cost Delivery Revenues Capital Operations and Maintenance Expense Customer Satisfaction

6. 6 How Does Operations Management Fit Into NU Business/Financial Model ? Revenues -Expenses= Net Income Operations Management Sales X ratesPSNH & WMECo + + “other”-= YG + CL&P + Transmission Operations Expenses Maintenance Expenses Capital Expenses Other Expenses

7. 7 NU Uses Operational Performance Indicators (KPIs) to Measure and Drive Operations Management High level KPIs are consistent across Operating Companies 4 Main Areas of Focus  Safety  Operations  Customer  Financial Total of 71 KPIs Targets set annually …. results reviewed monthly Lower level KPIs exist with Operating Companies and functions Short term and long term corrective actions expected where performance falls below targets.

8. 8 NU Operational KPIs/February 2008 CL&P YankeeWMECoPSNHTransmission Utility Services Consolidated

9. 9 Strategic Priority CL&P - SAIDI (IEEE) An Individual KPI (i.e. SAIDI)

10. 10 Each Year “Operational Plans” are Developed and Executed at NU by Operating Company/Business Unit to Manage Operations Performance 5 Year Enterprise Plan 1 Year Operational Plan Execution of Operational Plan Spring development 5 Year focus Strategic/major initiatives 5 year initiatives to identify major risks address business environment changes major KPI trend issues Fall development “Next Year” focus Compatible with 5 year Enterprise Plan Tactical Set Operational KPIs Initiatives to achieve KPIs

11. 11 CL&P Main Priorities for 2008 GoalInitiativesMeasures 3. Meet customer and regulator expectations for reliability  Implement year 2 of the Long Term (5 year) Reliability Plan Maintain a distribution system that is safe for employees and customers by completing the remainder of the A. B. Chance cutout replacement program and replacing cap and pin insulators in identified CL&P substations in 2008 Manage acute reliability problems by completing specifically identified reliability work in the towns of Stamford, Waterbury and Meriden; including the development of projects to expand distribution capacity to supply expected significant new load growth in downtown Stamford. Also replace or rejuvenate cable in identified direct buried developments with a history of extensive complaints and disruptive failures Manage aggregate CL&P SAIDI performance by identifying and completing cost effective capital reliability work that will net at least 7 minutes of SAIDI improvement helping to offset the impact of declining SAIDI performance due to trees and aging infrastructure. Complete 2008 capital related regulatory commitments (Stamford, Waterbury, Meriden) Manage capital program consistent with rate case funding  Improve performance of system maintenance program Finalize Maintenance Program Upgrade Plan, including the establishment of due dates, based on approved funding Based on finalized plan, perform specified maintenance in 2008 Complete all other 2008 actions specified in Maintenance Program Upgrade plan  Utilize human performance techniques to manage risk and minimize outage events  Prepare for and support the 2008 NERC audit  Implement a comprehensive self assessment program to identify and correct procedure compliance weaknesses  SAIDI (IEEE) of 150.00 minutes  CAIDI (IEEE) of 133.77 minutes  SAIFI (IEEE) of 1.121  Meet Long Term Reliability Plan milestones  Meet regulatory related reliability commitments  Finalize Maintenance Program Upgrade Plan by March 31, 2008  Complete specified maintenance in accordance with plan  Complete all other 2008 Maintenance Program Upgrade Plan actions  Receive NERC audit report with “no audit findings”  Complete four self assessments  Correct procedural inadequacies and/or compliance weaknesses identified through self assessments based on procedure timelines

12. 12 Major Events & Changes for Electric Utilities in New England/Last 50 Years Intensified “D” regulation Nuclear Construction M & As Integrated G & T planningT planning only Vertically integrated utilities Utilities Segmented Dropping energy costs Rising energy costs High sales growth Low sales growth Year 19551965196719731979 1985199020032008 Major EventsNortheast(NUOil3 MileHurricaneHurricaneNortheastGlobal Blackout 1Formed)EmbargoIslandGloriaBob,Blackout 2 Warming/ RestructuringRGGI Power Pool Development/FERC Influence Changes in Utility Environment Mostly stand alone utilities No Nuclear Construction ? Energy Efficiency Emphasis

13. 13 So ….. Operations Management Areas of Focus Have Had to Change With The Times (1955 – 2008) 1.Adapt to growing influence of power pools and FERC 2.Adapt to lack of integrated generation and transmission planning 3.Cope with increasing regulation (especially D segment) 4.Higher total energy costs = higher customer expectations 5.Manage an aging infrastructure (post WWII expansion) 6.Control delivery costs to offset higher energy costs and slower revenue growth 7.Take the lead in energy efficiency 8.Become “players” in legislative/regulatory decisions

14. 14 Key Operations Management Challenges Facing Distribution Utilities Today 1.Safety 2.Meeting increasing customer performance expectations 3.Managing an aging distribution delivery infrastructure 4.Managing increasing costs between rate cases 5.Managing areas of environmental risk 6.Planning for worker attrition 7.Reacting to changing laws and regulations 8.The goal is to accomplish items above while meeting Shareholder expectations for increased income over time