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 +

1

What is OperationsManagement

@ 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

Diagram of Integrated Electric System

Electric Generation

Transformer12,500 – 25,000v

Transmission Lines115,000 – 345,000 v Substation

Industrial User120 – 34,500 v

Commercial User120 – 480 v

Residential User120 - 240 v

Distribution Lines2,400 to 34,500 v

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Diagram of Integrated Gas System

GateGate

4

Mai

nten

ance

Operations Construction

Engineering

Design

Planning

CustomerService

Key Macro-Level OperationsManagement

Functions @ NU

Many other support/logistics functions help make this work e.g……• Purchasing/inventory/stores• Human Resources• Accounting• IT• etc., etc.

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Key Operations Management Terminology

Peak Demand (kW)Customer Usage (kWHr)Delivery EfficiencyDelivery CostDelivery RevenuesCapitalOperations and Maintenance ExpenseCustomer Satisfaction

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How Does Operations ManagementFit Into NU

Business/Financial Model ?

Revenues - Expenses = Net Income

Operations Management

Sales X rates PSNH & WMECo +

+ “other” - = YG + CL&P +

Transmission

Operations ExpensesMaintenance Expenses

Capital Expenses

Other Expenses

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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.

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NU Operational KPIs/February 2008

CL&P Yankee WMECo PSNH Transmission Utility Services

Consolidated

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CL&P - SAIDI (IEEE)

5.42 5.85

6.4 8.8

Data

Jan 07 Jan 00 Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07

CL&P YTD Actual 5.76 11.29 22.26 28.26 42.29 61.78 81.71 96.64 106.80 118.19 126.03 136.92

CL&P YTD Target 9.05 16.35 25.63 33.58 45.04 65.67 85.53 104.37 117.75 131.07 144.44 155.00

CL&P Month Actual 5.76 5.53 10.97 6.00 14.02 19.48 19.91 14.93 10.17 11.39 7.85 10.89

CL&P Month Target 9.05 7.30 9.28 7.95 11.46 20.63 19.86 18.84 13.38 13.32 13.37 10.56

Division Operations

Central Division-YTD Actual 4.95 9.84 18.12 22.94 34.45 49.22 62.59 75.25 82.59 96.84 101.49 110.90

Target 7.47 16.96 23.95 34.17 41.25 60.67 77.29 98.72 113.22 128.61 140.01 147.41

Eastern Division-YTD Actual 6.24 15.75 27.55 37.64 46.15 66.30 94.71 102.45 112.11 124.11 134.08 147.11

Target 13.33 19.52 29.14 38.36 56.09 75.63 91.83 107.67 120.83 136.89 149.08 166.59

Southern Division-YTD Actual 7.07 10.50 19.04 25.54 51.98 68.28 89.05 106.86 114.33 124.75 134.26 147.74

Target 7.93 14.20 25.20 31.67 44.46 67.21 93.04 117.33 127.78 138.74 155.50 165.21

Western Division-YTD Actual 5.11 9.34 23.98 27.13 38.92 64.74 82.76 103.94 119.26 128.14 135.85 144.27

Target 7.65 14.63 24.46 30.28 39.38 60.47 82.03 96.91 111.65 122.44 136.12 144.23

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

Jan 07 Jan 00 Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07

Min

ute

s

CL&P YTD Actual CL&P YTD Target

Good

0.0200.0

Jan07

Jan00

Mar07

Apr 07 May07

Jun07

Jul 07 Aug07

Sep07

Oct 07 Nov07

Dec07

Min

ute

s

CL&P YTD Actual CL&P YTD Target

Strategic Priority

An Individual KPI (i.e. SAIDI)

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Each Year “Operational Plans” are Developed and Executed at NU by Operating Company/Business Unit

to Manage Operations Performance

5 Year Enterprise Plan

1 YearOperational 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

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CL&P Main Priorities for 2008 Goal Initiatives Measures

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

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Major Events & Changes for Electric Utilities in New England/Last 50 Years

Intensified “D” regulation

Nuclear Construction

M & As

Integrated G & T planning T planning only

Vertically integrated utilities Utilities Segmented

Dropping energy costsRising energy costs

High sales growth Low sales growth

Year 1955 1965 1967 1973 1979 1985 1990 2003 2008

Major Events Northeast (NU Oil 3 Mile Hurricane Hurricane Northeast GlobalBlackout 1 Formed) Embargo Island Gloria Bob, Blackout 2 Warming/

Restructuring RGGI

Power Pool Development/FERC Influence

Ch

an

ges in

Uti

lity

En

vir

on

men

t

Mostly stand alone utilities

No Nuclear Construction

?

Energy Efficiency Emphasis

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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

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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