EAS_2007_annualreport

SUSTAIN

Energy East CorporationSummary Annual Report 2007

Energy East Corporation • 52 Farm View Drive • New Gloucester, Maine 04260 • www.energyeast.com

E61453_CVR.qxp:Energy East Sustainablity 3/7/08 15:54 Page 1

Shareholder ServicesBNY Mellon Shareowner Services (BNY Mellon) is transfer agent,registrar, recordkeeper, disbursing agent and administrator of the Investor Services Program for all Energy East common stock.

BNY Mellon Internet Address: www.melloninvestor.com

BNY Mellon’s Internet Website provides shareholders access to Investor Service Direct (ISD). Through ISD, shareholders can view their account profiles, stock certificate and book-entry histories,dividend reinvestment transactions, current stock price quote and historical stock closing prices. Shareholders may request a replacement dividend check, the issuance of stock certificates or the sale of shares from their Investor Services Program account.Shareholders may also utilize a live chat feature with a BNY Melloncustomer service representative during regular business hours as reflected below.

Shareholders may also contact BNY Mellon by telephone at 1-800-542-7480. BNY Mellon’s automated telephone service is available 24 hours a day, seven days a week. BNY Mellon’s customerservice representatives are available on regular business days between 9:00 a.m. and 7:00 p.m. (Eastern Time).

SHAREHOLDERS MAY OBTAIN A FREE COPY OF OUR FORM 10-K, WHICH IS FILED EACH YEAR WITH THE SECURITIES AND EXCHANGE COMMISSION, BY CONTACTING INVESTOR RELATIONS.

INVESTOR RELATIONS

Members of the financial community may contact Investor Relations by telephone at 207-688-4386.

TRADING SYMBOL: EAS

EAS is the trading symbol for Energy East Corporation common stock listed on the New York Stock Exchange.

ENERGY EAST INTERNET ADDRESS: www.energyeast.com

Information of interest to shareholders, including financial documents and news releases, is available at our Website.

PRINTING

Monroe Litho is proud to be certified as a Chain-of-Custody supplier by the Forest Stewardship Council. SCS-COC-00635 and certified as an EPA Green Power Partner operating on 100% Renewable, non-polluting Wind Power.

Environmental Benefits for printing at Monroe Litho using 100% Wind power – Quantity: 110,000

PAPER

Monadnock Astrolite PC 100 ® is 100% Post-Consumer-Recycled Material. Monadnock uses post-consumer fibre from waste sourcesthat are carefully selected and controlled creating a paper with the highest levels of consistency, brightness and cleanliness. All of Monadnock Paper Mills Graphic Arts and Packaging Papers are manufactured carbon neutral with 100% renewable electricity.

Environmental Benefits for using Monadnock Astrolite PC100 – 100% Post Consumer Recycled

Design: SVP Partners • Wilton, Connecticut • svppartners.com

Energy East Corporation

CO2 emissions saved: 14,538.96 lbs. • Trees planted equivalent: 778.54 • Miles of automobile travel saved: 9,886.96

Trees preserved for the future: 356.98 • Waterborne waste not created: 1,030.8lbs. • Wastewater flow saved: 151,634 gallons • Net greenhouse gases prevented:33,035 lbs. • Energy not consumed: 252,858,000 BTUsABILITY


CLEANER ENERGY SUPPLY. The utility industry’s greatest challenge is to reduce its climate-warming emissions, primarilyfrom burning fossil fuels, while meeting customers’ energy needs safely and reliably. At Energy East, we are doing that on the supply side by promoting cleaner-burning fuels and, where possible, opting for renewable sources of energy such as hydroelectricity and wind.

We plan operating improvements with three key objectives in mind: customer satisfaction, sustainable business practices and environmental security.

Since 2000, we have reduced our carbon footprint by 50%.

Connecticut Natural Gas and Southern Connecticut Gas have installed highly efficientdistributed natural gas cogeneration equipment at their operation centers in Orange and East Hartford, Connecticut. The new machineswill produce about half of the facilities’ power needs.

In a 2007 survey by Market Strategies,Inc., Central MainePower received thesecond-highest markfor environmental stewardship among 13 utilities in the Northeast.

In its 2006 Greenhouse Gas Reduction Report, the Environmental Protection Agency cited 33 projects of Connecticut Natural Gas and Southern Connecticut Gasthat resulted in carbon savings roughly equivalent to planting 50,000 acres of forest or taking 33,000 automobiles off the road.FA

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Energy East Service Area

Energy East’s electric operatingutilities have taken aggressiveactions to improve the overall efficiency of their buildings.Since 1999 electric usage hasbeen reduced 17% for a total reduction in CO2 emissions of30,000 tons.

Berkshire Gas customer Williams College of Williamstown, Massachusetts has set an aggressive greenhouse gas reduction goal of 10% below 1990-91 levels

CONSERVATION2


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SMARTER DEMAND. On the demand side, we are helping our customers conserve energy, which saves them money, reducesclimate change and delays the need to build new generating capacity. Moving power more efficiently accomplishes thesame goals. In two major infrastructure programs expected to commence in 2009, we will invest more than $1 billion to improve the reliability of our transmission system in Maine and provide access to renewable generation resources.

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Every 100 megawatts of reduced peak-hour electricity consumption through “smart” metering will save customers approximately $5 million and reduce CO2 emissions by more than 500,000 tons, equivalent to planting 21 million trees or taking 82,000 cars off the road.

Our proposed Advanced Metering Infrastructure(smart meters) for Maineand New York will enablecustomers to monitor their energy costs more accurately, resulting ingreater energy conservation.

by 2020. A major step taken during 2007 was switching to natural gas for heating, replacing heating oil traditionally used in the college’s boiler/steam plant.

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COMMITMENT

Our local initiatives add up.

Combined, New York State Electric & Gas and Rochester Gas

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In 2007, Connecticut Natural Gas, Southern Connecticut Gas and Berkshire Gas signed on to the Environmental ProtectionAgency’s Natural Gas STAR program, a commitment to voluntarily reduce emissions of methane, a greenhouse gas and primary component of natural gas.

Sustainable power. Iberdrola is the right partner at the right time. It is the world’s largest wind-energy producer with nearly 8,000 megawatts in

4

For the past seven years, New York State Electric & Gas has had the lowest customer complaint rate of any combination electric and natural gas utility in New York State.


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and Electric are the third-largest generator of hydroelectric power in New York State.

THINK GLOBALLY. ACT LOCALLY. We believe that the essential commitments underlying the utility business – safety, reliabilityand environmental stewardship – are stronger the closer you are to the customer. For that reason, Energy East has encouraged the regional autonomy of our eight utilities. Their long-established local presence promotes customer satisfaction and strong business partnerships. The combined strength of all our companies enables us to commit the investment needed to ensure our infrastructure provides a safe, clean and reliable energy supply for future generations.

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operation and over 40,000 megawatts in its development pipeline. Iberdrola was named by Global 100 as one of its “100 Most Sustainable Corporations.”

5

New York State Electric & Gas and Rochester Gas and Electric support a wind-energy initiative that allows customers to make an environmentally informed choice with their energy dollars by purchasing wind-generated electricity, thereby supporting sustainable business practices. In 2007 participation grew over 50%.

Connecticut Natural Gas recentlybegan using a new process for filtering debris from pipeline liquids that have infiltrated the underground system. The fluidsare collected and tested after filtration to ensure that any contamination has been removed before the water is released into the environment.


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We recognize the need to stay ahead of our customers’ expectations.

2007 waste-aversion initiatives: • Remanufactured tires: 37 tons saved • Recycling of scrap materials: 800 tons saved • Refurbished transformers: 90 tons

Energy East has been a leader in the Environmental ProtectionAgency’s self-compliance program for sulfur hexafluoride(SF6) gas losses. SF6 is a nontoxicgas used as an insulator in high-voltage circuit breakersthat has 24,000 times more climate-warming effect than CO2 . By installing new primarybreakers that require less SF6

and aggressively avoiding leaks,we have reduced our SF6 lossesby 80% since 1998.

In 2007 Energy East purchased 78 Ford Focuspartial-zero emissions vehicles and 100 Ford Escape hybrids that havethe potential to reduce CO2 by more than 825 tons per year.

RESPONSIBLE6

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MEASURING IMPACT. MINIMIZING WASTE. Energy East practices high standards of environmental stewardship in all the communities we serve. It is our policy to include environmental impact considerations in all decision-making and to systematically plan, implement and improve our processes. That includes waste minimization, greener purchasing and fostering an employee culture where our people have the training and knowledge to support environmental stewardship.

Customers can make an environmentally informed choice.

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saved • Remanufactured toner cartridges: 3 tons saved • 30%-recycled-content office paper: 4 tons saved • Wood and paper recycling: 8 tons saved

Since the late 1990s, Berkshire Gas has conducted more than15,000 energy audits andprovided $1.2 million in rebates to its customers for installation of high-efficiency heating equipment. CO2 emissionshave been reduced by more than 16,000 tons.

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Energy East is now purchasing new energy-efficient, environmentally-preferable transformers replacing approximately 17,000 old,inefficient models annually. The newtransformers, among the highest rated on the market, are filled withplant-based cooling fluid instead ofthe petroleum found in older models.Improved transformer performance reduces line losses, lowers CO2

emissions, and provides customerswith more electricity per dollar whiledeferring the need to add power-generating capacity.

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RELIABLE

Rochester Gas and Electric is scheduled to complete the Rochester Transmission Project in the spring of 2008. Thirty-eight miles of transmission lines will be

We are upgrading with the very latest technologies.FA

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Subject to state regulatory approval, Rochester Gas and Electric plans to replace its 1950s-vintage coal-powered 257-megawatt Russell Station with a state-of-the-art, 300-megawatt natural gas combined-cycle generating station.

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INVESTING IN THE FUTURE. PARTNERING WITH THE BEST. When utility customers flip a light switch they expect the light to go on. It will take billions of dollars to ensure that our three million customers have access to reliable power across a state-of-the art grid from sources that are increasingly more sustainable. This is where Iberdrola will help. One of the world’s largest and greenest energy companies, it brings the financial strength to make that investment, and the commitment to sustainability that is the future of energy.

replaced and substations in the Rochester area will be upgraded to meet growing demand and allow us to shut down the Russell coal-fired generating plant.

Rochester Gas and Electric is investing morethan $20 million to optimize two hydroelectricfacilities on the Genesee River in Rochester,increasing total capacity by nine megawatts. This additional “clean” generation from renewable sources will avoid nearly 14,000tons of CO2, 60 tons of SO2, and 20 tons of NOx

that would have been created from burningconventional fossil fuels.

Compared to the existing coal-fired plant, the planned natural gas-fired Russell Station will emit 99% less SO2, 97% lessNOx, and 44% less CO2.The plant is scheduled to be in operation in 2013.

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2007 WAS A BIG YEAR FOR ENERGY EAST. In June, Iberdrola SA, the world’ s fourth-largest utility, agreed to acquire our company in a cash offer that reflects a 27% premium over our stock price prior to announcement. The implications aremany. Most promising is the expertise and financial strength Iberdrola will bring to an industry in need of significant capital investment. Iberdrola is also strongly committed to sustainability. These are the two most critical challenges facing us today.

In last year’s annual report, I discussed our plans to invest more than $3 billion for three priorities: carbon reduction technologies such as high efficiency transformers and advanced metering infrastructure (smart meters), electric transmission to ensure reliability, and the development of more environmentally responsible sources of energy, including renewables and other greener generation technologies.

Those initiatives remain on track. However, it became clear to us that our long-term ability to execute those plans wouldbe greatly enhanced by partnering with a larger and financially stronger utility. This prompted our willingness to speak with Iberdrola when they approached us in the fall of 2006.

The proposed acquisition by Iberdrola has received widespread support from all constituencies, including consumergroups, regulators, politicians, employees, and our shareholders. To date, we have received all required federal and state regulatory approvals, with the exception of approval from New York State. Shareholders offered their overwhelmingendorsement last November. We hope to close the transaction by June 2008.

As we work through the proposed acquisition, our ongoing priorities remain the same: maintain outstanding customer service and reliability, push forward our infrastructure initiatives and provide attractive returns for shareholders.

IN 2007, WE DID ALL THREE.

Energy East’s utilities continued to receive high marks for their quality service. In an independent study by Market Strategies, Inc. four of our six utilities received a “best in class” customer satisfaction rating relative to a peer group of 15 utilities. In a 2007 JD Power small business customer satisfaction study, Energy East ranked third in the Eastern region.

Infrastructure investments are progressing well. Subject to state regulatory approvals, we expect to begin installation of smart meters this year in Maine and New York. Two major transmission investments are being reviewed by the New England Independent System Operator and the Maine Public Utilities Commission, and are expected to begin licensing and permitting later this year. We expect to commence construction in 2009 and anticipate a total investment in excess of $1 billion.

To our Shareholders:

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Shareholders earned better returns than expected in 2007. Earnings were $1.62 per share, exceeding our internal estimates and those of Wall Street. The credit goes in large part to our dedicated and capable people who found efficiencies that helped cushion the effect of a negative rate decision for New York State Electric & Gas that commenced January 1, 2007. The Board of Directors also increased the annual common stock dividend by four cents a share in October 2007, the 10th consecutive year-over-year increase.

We have two key goals for 2008. Foremost is to complete the merger with Iberdrola. We will also work very hard to maintain our excellent customer service with an emphasis on infrastructure investment and sustainability.

Each year in this letter I acknowledge our employees for their dedication. Our people have made Energy East one of the most respected utilities in the nation. This year, I am especially proud. Acquisitions, while a fact of business life, can nevertheless be unnerving. Energy East people have not only continued to do their jobs well – as our results demonstrate – but are positive about the future with Iberdrola.

I would like to recognize two directors, Joseph J. Castiglia and Lois B. DeFleur both of whom retired from the Board in 2007 after 12 years of outstanding service. Jerry most recently was our lead director and chaired our Compensation and Management Succession Committee, while Lois chaired our Nominating and Corporate Governance Committee. We appreciate their wise counsel and leadership, and wish them well in retirement.

On a sad note, Walter G. Rich passed away in August of 2007. Walt served for 10 years on the Board with distinction anddedication, and was chair of the Corporate Responsibility Committee. He will be truly missed.

Speaking on behalf of the Board of Directors, we are grateful for your faith in the company and your long-standing support of Energy East.

Wes von Schack

Wesley W. von SchackChairman and Chief Executive OfficerFebruary 28, 2008

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$1.30

$1.20

$1.10

$1.00

$0.90

$0.80

$0.70

$0.60

$0.50

97 98 99 00 01 02 03 04 05 06 07

Successfully executing our strategy

In an independent survey, Energy East ranks in the top 5% of S&P 400 companies for excellence in corporate governance.

Energy East’s ratio of common equity to total capital, a measure of financial strength, improved once again in 2007 ending the year at 44% up from 34% in 2002.

Since 1997 Energy East’s stock has provided a total return of over 300%, easily surpassing the return of both the S&P 500 and the S&P Utility Indices.

$0.70

$0.78$0.84

$0.88$0.92

$0.96$1.00

$1.06

$1.12$1.17

$1.21

RESULTS12

Energy East’s threeelectric utilities were among the top utilities in the eastern UnitedStates in business customer satisfaction, according to a recentJD Power study.

Dividends paid per share 1997 – 2007


Financial HighlightsOperating Results (Thousands) 2007 2006 % Change

Total Operating Revenues $5,178,108 $5,230,665 (1)Total Operating Expenses $4,563,087 $4,527,173 1Net Income $251,298 $259,832 (3)

Per Common Share

Earnings, basic $1.62 $1.77 (8)Dividends Declared $1.21 $1.17 3Book Value at Year End $20.26 $19.37 5Price at Year End $27.21 $24.80 10

Other Common Stock Information (Thousands)

Average Common Shares Outstanding, basic 154,801 146,962 5Common Shares Outstanding at Year End 158,279 147,907 7

Energy Distribution (Thousands)

Megawatt-hoursRetail Deliveries 32,073 31,222 3Wholesale Deliveries 7,241 9,318 (22)

DekathermsRetail Deliveries 198,350 188,211 5Wholesale Deliveries 1,753 110 NM

Total Assets at Year End (Thousands) $11,878,709 $11,562,401 3

NM – Not Meaningful


Financial Summary Contents

Condensed Consolidated Balance Sheets 14Condensed Consolidated Statements of Income 16Condensed Consolidated Statements of Cash Flows 17Condensed Consolidated Statements of Changes in Common Stock Equity 18Management’s Annual Report on Internal Control and Required Certifications 19Report of Independent Registered Public Accounting Firm 19Selected Financial Data 20Energy Distribution Statistics 21Energy East Corporation At-a-Glance 22Directors and Officers 24Shareholder Services Inside Back Cover

13



14

Condensed Consolidated Balance SheetsDecember 31 (Thousands) 2007 2006

AssetsCurrent Assets

Cash and cash equivalents $97,066 $93,373Investments available for sale 177,045 20,000Accounts receivable and unbilled revenues, net 990,255 914,657Fuel and natural gas in storage, at average cost 258,172 277,766Materials and supplies, at average cost 28,722 33,273Deferred income taxes 38,383 93,187Derivative assets 23,959 1,327Prepayments and other current assets 132,991 193,226

Total Current Assets 1,746,593 1,626,809

Utility Plant, at Original CostElectric 5,787,362 5,557,858Natural gas 2,708,612 2,654,426Common 583,657 550,440

9,079,631 8,762,724Less accumulated depreciation 3,086,765 2,935,798

Net Utility Plant in Service 5,992,866 5,826,926

Construction work in progress 165,628 121,097

Total Utility Plant 6,158,494 5,948,023

Other Property and Investments 172,993 183,315

Regulatory and Other AssetsRegulatory assets

Nuclear plant obligations 190,367 263,659Unfunded future income taxes 338,749 256,683Environmental remediation costs 185,773 128,925Unamortized loss on debt reacquisitions 48,819 52,724Nonutility generator termination agreements 64,744 79,241Natural gas hedges 11,154 47,372Pension and other postretirement benefits 259,554 351,011Other 346,079 356,299

Total regulatory assets 1,445,239 1,535,914

Other assetsGoodwill 1,526,048 1,526,048Prepaid pension benefits 698,432 577,356Derivative assets 17,450 46,375Other 113,460 118,561

Total other assets 2,355,390 2,268,340

Total Regulatory and Other Assets 3,800,629 3,804,254

Total Assets $11,878,709 $11,562,401



15

Condensed Consolidated Balance SheetsDecember 31 (Thousands) 2007 2006

LiabilitiesCurrent Liabilities

Current portion of long-term debt $99,914 $260,768Notes payable 137,717 109,363Accounts payable and accrued liabilities 484,963 470,325Interest accrued 58,681 57,243Taxes accrued 77,276 44,009Unfunded future income tax – 19,664Derivative liabilities 11,491 71,678Customer refund – 70,770Other 251,239 209,839

Total Current Liabilities 1,121,281 1,313,659

Regulatory and Other LiabilitiesRegulatory liabilities

Accrued removal obligation 892,333 843,273Deferred income taxes 5,088 105,528Gain on sale of generation assets 99,514 127,674Pension benefits 124,300 127,330Natural gas hedges 1,544 –Other 165,869 93,268

Total regulatory liabilities 1,288,648 1,297,073

Other liabilitiesDeferred income taxes 1,322,738 1,105,117Nuclear plant obligations 157,376 202,963Pension and other postretirement benefits 451,642 530,838Environmental remediation costs 158,629 168,949Derivative liability 21,318 21,871Other 248,368 306,283

Total other liabilities 2,360,071 2,336,021

Total Regulatory and Other Liabilities 3,648,719 3,633,094

Long-term debt 3,877,029 3,726,709

Total Liabilities 8,647,029 8,673,462

Commitments and ContingenciesPreferred Stock of Subsidiaries

Redeemable solely at the option of subsidiaries 24,587 24,592Common Stock Equity

Common stock ($.01 par value, 300,000 shares authorized, 158,279 shares outstanding at December 31, 2007, and 147,907 shares outstanding at December 31, 2006) 1,583 1,480

Capital in excess of par value 1,752,465 1,505,795Retained earnings 1,447,889 1,382,461Accumulated other comprehensive income (loss) 7,609 (23,779)Treasury stock, at cost (86 shares at December 31, 2007, and 52 shares at December 31, 2006) (2,453) (1,610)

Total Common Stock Equity 3,207,093 2,864,347

Total Liabilities and Stockholders' Equity $11,878,709 $11,562,401



16

Condensed Consolidated Statements of IncomeYear Ended December 31 (Thousands, except per share amounts) 2007 2006 2005

Operating RevenuesUtility $4,652,783 $4,720,638 $4,753,105Other 525,325 510,027 545,438

Total Operating Revenues 5,178,108 5,230,665 5,298,543

Operating ExpensesElectricity purchased and fuel used in generation

Utility 1,441,000 1,467,068 1,457,746Other 363,793 353,402 360,621

Natural gas purchasedUtility 1,116,092 1,079,980 1,161,059Other 90,418 79,472 107,755

Other operating expenses 842,996 796,350 797,015Maintenance 175,618 218,499 197,704Depreciation and amortization 277,490 282,568 277,217Other taxes 255,680 249,834 246,271

Total Operating Expenses 4,563,087 4,527,173 4,605,388

Operating Income 615,021 703,492 693,155Other (Income) (38,884) (46,126) (32,904)Other Deductions 11,483 24,578 8,858Interest Charges, Net 275,938 308,824 288,897Preferred Stock Dividends of Subsidiaries 1,128 1,129 1,474

Income Before Income Taxes 365,356 415,087 426,830Income Taxes 114,058 155,255 169,997

Net Income $251,298 $259,832 $256,833

Earnings per Share, basic $1.62 $1.77 $1.75

Earnings per Share, diluted $1.61 $1.76 $1.74

Average Common Shares Outstanding, basic 154,801 146,962 146,964

Average Common Shares Outstanding, diluted 155,805 147,717 147,474



17

Condensed Consolidated Statements of Cash FlowsYear Ended December 31 (Thousands) 2007 2006 2005

Operating ActivitiesNet income $251,298 $259,832 $256,833Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization 386,850 418,152 382,873Income taxes and investment tax credits deferred, net 107,443 31,125 69,729Pension income (47,355) (30,081) (29,967)

Changes in current operating assets and liabilitiesAccounts receivable and unbilled revenues, net (164,649) 16,026 (107,308)Inventory 24,507 1,437 (86,735)Prepayments and other current assets 61,553 (65,466) (36,373)Accounts payable and accrued liabilities 25,029 (141,529) 203,392Taxes accrued 15,002 11,148 1,376Interest accrued 1,438 10,721 3,053Customer refund (10,056) (15,485) (25,329)Other current liabilities (14,540) (15,767) 11,448

Pension and OPEB contributions (66,000) (400) (54,320)Changes in other assets

RG&E nuclear plant dispute settlement – (33,655) (125)Other (48,669) (1,722) (76,167)

Changes in other liabilitiesASGA charges (41,008) (59,443) (45,406)Other 30,357 (6,407) 37,758

Net Cash Provided by Operating Activities 511,200 378,486 504,732

Investing ActivitiesUtility plant additions (444,009) (408,231) (331,294)Other property additions (2,570) (3,817) (2,507)Other property sold 19 342 25,704Maturities of current investments available for sale 1,007,850 1,054,665 1,635,005Purchases of current investments available for sale (1,164,895) (881,740) (1,692,275)Investments 1,771 11,022 (3,064)

Net Cash Used in Investing Activities (601,834) (227,759) (368,431)

Financing ActivitiesIssuance of common stock 234,980 343 2,654Repurchase of common stock (8,339) (6,107) (6,492)Issuance of first mortgage bonds 139,890 – 70,000Repayments of first mortgage bonds and preferred

stock of subsidiaries, including net premiums (190,006) (39) (47,260)Derivative activity – 22,899 –Long-term note issuances 259,758 652,137 208,893Long-term note repayments (192,221) (667,263) (120,061)Notes payable three months or less, net 28,756 (12,873) (85,967)Notes payable issuances 2,654 1,436 1,251Notes payable repayments (3,055) (547) (408)Dividends on common stock (178,090) (167,349) (150,367)

Net Cash Provided by (Used in) Financing Activities 94,327 (177,363) (127,757)

Net Increase (Decrease) in Cash and Cash Equivalents 3,693 (26,636) 8,544Cash and Cash Equivalents, Beginning of Year 93,373 120,009 111,465

Cash and Cash Equivalents, End of Year $97,066 $93,373 $120,009



18

Condensed Consolidated Statements of Changes in Common Stock EquityCommon Stock Accumulated

Outstanding Capital in Other(Thousands, except $.01 Par Value Excess of Retained Comprehensive Deferred Treasury(Thousands, except per share amounts) Shares Amount Par Value Earnings Income (Loss) Compensation Stock Total

Balance, January 1, 2005 147,118 $1,472 $1,477,518 $1,201,533 $(43,561) $(5,020) $(683) $2,631,259

Net income 256,833 256,833Other comprehensive income, net of tax 132,646 132,646

Comprehensive income 389,479Common stock dividends declared

($1.115 per share) (163,786) (163,786)Common stock issued –

Investor Services Program 607 6 16,066 16,072Common stock repurchased (250) (6,492) (6,492)Common stock issued – restricted stock plan 265 (6,404) (451) 6,855 –Amortization of deferred compensation

under restricted stock plan 5,471 5,471Treasury stock transactions, net (39) 1,702 (1,405) 297Amortization of capital stock issue expense, net 374 374

Balance, December 31, 2005 147,701 1,478 1,489,256 1,294,580 89,085 – (1,725) 2,872,674

Net income 259,832 259,832Other comprehensive income, net of tax (113,502) (113,502)

Comprehensive income 146,330Adjustment to initially apply Statement 158 638 638Common stock dividends declared

($1.17 per share) (171,951) (171,951)Common stock issued –

Investor Services Program 204 2 4,943 4,945Common stock repurchased (250) (6,107) (6,107)Common stock issued – restricted stock plan 274 (6,722) 6,722 –Amortization of restricted stock plan grants 8,458 8,458Treasury stock transactions, net (22) (2) (500) (502)Amortization of capital stock issue expense, net 9,862 9,862

Balance, December 31, 2006 147,907 1,480 1,505,795 1,382,461 (23,779) – (1,610) 2,864,347

Net income 251,298 251,298Other comprehensive income, net of tax 31,388 31,388

Comprehensive income 282,686Adjustment to initially apply FIN 48 1,291 1,291Common stock dividends declared

($1.21 per share) (187,161) (187,161)Common stock issued – public offering 10,000 100 242,400 242,500Common stock issued –

Investor Services Program 406 3 10,094 10,097Common stock repurchased (350) (8,387) (8,387)Common stock issued – restricted stock plan 344 (8,273) 8,273 –Amortization of restricted stock plan grants 9,943 9,943Treasury stock transactions, net (28) 27 (729) (702)Capital stock issue expense (7,521) (7,521)

Balance, December 31, 2007 158,279 $1,583 $1,752,465 $1,447,889 $7,609 – $(2,453) $3,207,093



Management’s Annual Report on Internal Control and Required Certifications

19

Management’s Annual Report on Internal Control Over Financial ReportingEnergy East’s management is responsible for establishing andmaintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for externalpurposes in accordance with accounting principles generally accepted in the United States of America. Under the supervision and with the participation of management, including the principalexecutive officer and principal financial officer, an evaluation wasconducted of the effectiveness of the internal control over financialreporting based on the framework in Internal Control – IntegratedFramework issued by The Committee of Sponsoring Organizations of the Treadway Commission. Based on Energy East’s evaluation under the framework in Internal Control – Integrated Framework, management concluded that Energy East’s internal control over financial reporting was effective as of December 31, 2007.

To the Shareholders and Board of Directors of Energy East Corporation and Subsidiaries:We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedbalance sheets of Energy East Corporation and its subsidiaries as ofDecember 31, 2007 and 2006, and the related consolidated statements of income, of cash flows and of changes in common stock equity for eachof the three years in the period ended December 31, 2007 (not presentedherein) appearing in the 2007 Form 10-K of Energy East Corporation; and in our report dated February 28, 2008, we expressed an unqualifiedopinion on those consolidated financial statements. As discussed in Note 1 to the consolidated financial statements, effective January 1,2007, the Company adopted Financial Accounting Standards BoardInterpretation No. 48, Accounting for Uncertainty in Income Taxes – aninterpretation of FASB Statement No. 109 and effective December 31,2006, the Company adopted Statement of Financial Accounting StandardsNo. 158, Employers’ Accounting for Defined Benefit Pension and OtherPostretirement Plans – an amendment of FASB Statements No. 87, 88,106, and 132(R).

In our opinion, the information set forth in the accompanying condensedconsolidated financial statements is fairly stated, in all material respects,in relation to the consolidated financial statements from which it hasbeen derived.

PricewaterhouseCoopers LLPPhiladelphia, PennsylvaniaFebruary 28, 2008

Required CertificationsOn July 12, 2007, Energy East submitted to the New York Stock Exchangeits Annual Chief Executive Officer Certification under Section 303A of theNew York Stock Exchange Corporate Governance Rules.

Energy East filed with the Securities and Exchange Commission theCertifications of its Chief Executive Officer and Chief Financial Officer as required under Section 302 of the Sarbanes-Oxley Act of 2002. The certifications were filed as Exhibits 31-1 and 31-2 to Energy East’s Form 10-K for the fiscal year ended December 31, 2007, dated February 29, 2008.

Report of Independent Registered Public Accounting Firm



20

Selected Financial DataYear Ended December 31 (Thousands, except per share amounts) 2007 2006 2005 2004 2003

Operating RevenuesUtility $4,652,783 $4,720,638 $4,753,105 $4,330,472 $4,220,822Other 525,325 510,027 545,438 426,220 293,668

Total Operating Revenues 5,178,108 5,230,665 5,298,543 4,756,692 4,514,490

Operating ExpensesElectricity purchased and fuel used in generation

Utility 1,441,000 1,467,068 1,457,746 1,321,081 1,192,397Other 363,793 353,402 360,621 249,330 145,972

Natural gas purchasedUtility 1,116,092 1,079,980 1,161,059 952,806 862,452Other 90,418 79,472 107,755 77,508 77,012

Other operating expenses 842,996 796,350 797,015 799,460 813,133Maintenance 175,618 218,499 197,704 173,191 203,043Depreciation and amortization 277,490 282,568 277,217 292,457 299,430Other taxes 255,680 249,834 246,271 252,860 269,238Gain on sale of generation assets – – – (340,739) –Deferral of asset sale gain – – – 228,785 –

Total Operating Expenses 4,563,087 4,527,173 4,605,388 4,006,739 3,862,677

Operating Income 615,021 703,492 693,155 749,953 651,813Other (Income) (38,884) (46,126) (32,904) (35,497) (17,226)Other Deductions 11,483 24,578 8,858 15,803 28,395Interest Charges, Net 275,938 308,824 288,897 276,890 284,482Preferred Stock Dividends of Subsidiaries 1,128 1,129 1,474 3,691 19,009

Income From Continuing OperationsBefore Income Taxes 365,356 415,087 426,830 489,066 337,153

Income Taxes 114,058 155,255 169,997 251,445 128,663

Income From Continuing Operations 251,298 259,832 256,833 237,621 208,490(Loss) Income From Discontinued Operations,

Net of Income Taxes – – – (8,284) 1,956

Net Income 251,298 259,832 256,833 229,337 210,446Common Stock Dividends 187,161 171,951 163,786 154,261 145,417

Retained Earnings Increase(1) $65,428 $87,881 $93,047 $75,076 $65,029

Average Common Shares Outstanding, basic 154,801 146,962 146,964 146,305 145,535Average Common Shares Outstanding, diluted 155,805 147,717 147,474 146,713 145,730Earnings per Share, basic(2) $1.62 $1.77 $1.75 $1.57 $1.45Earnings per Share, diluted(2) $1.61 $1.76 $1.74 $1.56 $1.44Dividends Declared Per Share $1.21 $1.17 $1.115 $1.055 $1.00

Book Value per Share ofCommon Stock at Year End $20.26 $19.37 $19.45 $17.89 $17.57

Utility Capital Spending $444,009 $408,231 $331,294 $299,263 $289,320Total Assets $11,878,709 $11,562,401 $11,487,708 $10,796,622 $11,330,441Long-term Obligations, Capital Leases

and Redeemable Preferred Stock $3,877,029 $3,726,709 $3,667,065 $3,797,685 $4,017,846

(1) The 2007 increase includes $1.3 million for an adjustment to initially apply FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.(2) Earnings per Share from Continuing Operations, basic was $1.63 for 2004 and $1.43 for 2003. Earnings per Share from Continuing Operations, diluted was $1.62 for 2004 and $1.43 for 2003.



21

Energy Distribution StatisticsYear Ended December 31 (Thousands) 2007 2006 2005 2004 2003

Electric Deliveries(Megawatt-hours)

Residential 12,439 12,142 12,601 11,848 11,676Commercial 10,036 9,618 9,805 9,480 9,266Industrial 7,298 7,235 7,334 7,446 7,412Other 2,300 2,227 2,279 2,245 2,239

Total Retail 32,073 31,222 32,019 31,019 30,593

Wholesale 7,241 9,318 9,466 7,855 5,734

Total Electric Deliveries 39,314 40,540 41,485 38,874 36,327

Electric RevenuesResidential $1,282,199 $1,267,525 $1,284,606 $1,163,887 $1,204,228Commercial 571,205 556,635 536,779 565,976 667,802Industrial 259,643 272,163 268,647 284,608 344,352Other 158,633 157,016 160,073 177,029 191,756

Total Retail 2,271,680 2,253,339 2,250,105 2,191,500 2,408,138

Wholesale 465,804 554,500 568,746 402,122 233,331Other 143,510 215,198 150,707 187,700 117,226

Total Electric Revenues $2,880,994 $3,023,037 $2,969,558 $2,781,322 $2,758,695

Natural Gas Deliveries(Dekatherms)

Residential 78,061 70,637 80,049 82,574 85,401Commercial 25,687 23,904 26,733 26,493 25,938Industrial 3,591 3,526 3,951 4,062 3,458Other 13,340 12,891 11,020 11,276 11,301Transportation of customer-owned natural gas 77,671 77,253 82,924 84,039 86,647

Total Retail 198,350 188,211 204,677 208,444 212,745

Wholesale 1,753 110 883 1,593 5,360

Total Natural Gas Deliveries 200,103 188,321 205,560 210,037 218,105

Natural Gas RevenuesResidential $1,124,468 $1,076,323 $1,150,187 $1,020,544 $944,010Commercial 343,717 327,344 349,596 287,926 266,409Industrial 39,824 39,973 42,588 36,147 27,312Other 143,915 140,979 130,488 100,440 86,162Transportation of customer-owned natural gas 98,443 91,908 91,376 89,843 99,896

Total Retail 1,750,367 1,676,527 1,764,235 1,534,900 1,423,789

Wholesale 15,058 563 643 182 21,070Other 6,364 20,511 18,669 14,068 17,268

Total Natural Gas Revenues $1,771,789 $1,697,601 $1,783,547 $1,549,150 $1,462,127


Connecticut Natural GasCorporation (CNG)

www.cngcorp.com

Natural Gas155,000 customers35,495 delivered (000 Dth)$406 million revenues

$949 million assets

The Berkshire Gas Company (Berkshire Gas)

www.berkshiregas.com

115 Cheshire RoadPittsfield, MA 01201

Natural Gas36,000 customers7,340 delivered (000 Dth) $73 million revenues

$225 million assets

Robert M. Allessio,Chairman and CEO

Karen L. Zink,President, Treasurer & COO

Cheryl M. Clark,Clerk

Maine Natural Gas Corporation (MNG)

www.mainenaturalgas.com

4 Industrial ParkwayBrunswick, ME 04011

Natural Gas1,800 customers18,339 delivered (000 Dth) $9 million revenues

$26 million assets

Robert M. Allessio, President

Darrell R. Quimby,VP and Clerk

www.energyeast.com

2,989,000 customers$5.2 billion revenues$11.9 billion assets

The Southern Connecticut Gas Company (SCG)www.soconngas.com


$1,043 million assets

Robert M. Allessio, President and CEOJames E. Earley, VP, Controller & TreasurerJanet L. Janczewski, SecretaryTim D. Kelley, VP Energy ServicesWilliam Reis, VP Administrative Services

22

77 Hartland Street, East Hartford, CT 06108


New York State Electric &Gas Corporation (NYSEG)

www.nyseg.com

Electricity872,000 customers16,831 delivered (GWh)$1,558 million revenues



Rochester Gas and ElectricCorporation (RG&E)

www.rge.com

Electricity360,000 customers11,759 delivered (GWh)$750 million revenues



Central Maine PowerCompany (CMP)

www.cmpco.com

83 Edison DriveAugusta, ME 04336



Sara J. Burns,President and CEO

Kathleen A. Case,VP Customer Service

Douglas A. Herling,VP Operations

Stephen G. Robinson,VP Technical Services

Eric N. Stinneford,VP Treasurer, Controller & Clerk

The Energy Network, Inc.(TEN)

www.nysegsolutions.comwww.energetix.net

81 State StreetBinghamton, NY 13901



$99 million assets

Carl A. Taylor,President and CEO

Mark R. Beaudoin,VP and COO

Teresa Bradford,VP and Controller

James T. Distefano,VP Sales and Marketing

James P. Laurito, President and CEOJeffrey R. Clark, SecretaryLaura Conklin, VP Technical ServicesMichael H. Conroy, VP OperationsMichael D. Eastman, VP Gas AssetsDavid J. Irish, VP Fossil / Hydro OperationsDavid J. Kimiecik, VP Energy SupplyJames A. Lahtinen, VP Rates and Regulatory EconomicsJoseph J. Syta, VP Controller & TreasurerTeresa M. Turner, VP Customer Service

23

89 East Avenue, Rochester, NY 14649


BOARD OF DIRECTORS

JAMES H. BRANDI, a director since 2006, is a member of Hill Street Capital LLC in New York, New York; formerly Managing Director and Deputy Global Head of the Energy and Power Group of UBS Securities, LLC.

JOHN T. CARDIS, a director since 2005, former partner of Deloitte &Touche USA, LLP, New York, New York; is a director of Edwards Lifesciences Corporation in Irvine, California and Avery Dennison Corporation in Pasadena, California.

THOMAS B. HOGAN, JR., a director since 2007, former partner of Deloitte & Touche USA, LLP, New York, New York; is a director andChairperson of the Audit Committee of Pictometry Corporation inRochester, New York.

G. JEAN HOWARD, a director since 2002, is Chief of Staff, Office of the Mayor, City of Rochester in Rochester, New York.

DAVID M. JAGGER, a director since 2000, is President and Treasurer of Jagger Brothers, Inc. in Springvale, Maine.

SETH A. KAPLAN, a director since 2005 and who serves as lead director, is a Coadjutant member of the faculty at Rutgers University School of Law – Newark in Newark, New Jersey; former partner of Wachtell,Lipton, Rosen & Katz, New York, New York.

BEN E. LYNCH, a director since 1987, is President of Winchester Optical Company in Elmira, New York.

PETER J. MOYNIHAN, a director since 2000, formerly Senior Vice President and Chief Investment Officer of UNUM Corporation in Portland, Maine.

PATRICIA M. NAZEMETZ, a director since 2007, is Vice President, Human Resources and Ethics for Xerox Corporation in Stamford, Connecticut.

WESLEY W. VON SCHACK, a director since 1996, is Chairman, President & Chief Executive Officer of the corporation.

COMMITTEES (Chairperson listed first)

Audit: Lynch, Hogan, Jagger, Kaplan, Moynihan

Compensation and Management Succession: Cardis, Brandi, Lynch, Nazemetz

Corporate Responsibility: Moynihan, Brandi, Hogan, Howard

Nominating and Corporate Governance: Kaplan, Cardis, Howard, Jagger, Nazemetz

ENERGY EAST OFFICERS

STEVEN R. ADAMS, Vice President – Regulatory Policy

ANGELA BEDDOE, Vice President – Public Affairs

RICHARD R. BENSON, Senior Vice President and Chief Administrative Officer

CURTIS I. CALL, Controller

PAUL K. CONNOLLY, JR., Vice President – General Counsel

ELAINE T. DUBRAVA, Secretary

ROBERT D. KUMP, Senior Vice President and Chief Financial Officer

F. MICHAEL MCCLAIN, Senior Vice President and Chief Development and Integration Officer

PATRICK T. NEVILLE, Vice President – Information Technology

CLIFTON B. OLSON, Vice President – Supply

JESSICA S. RAINES, Vice President – Procurement and Contracts

ROBERT E. RUDE, Senior Vice President and Chief Regulatory Officer

Directors and Officers


24


Shareholder ServicesBNY Mellon Shareowner Services (BNY Mellon) is transfer agent,registrar, recordkeeper, disbursing agent and administrator of the Investor Services Program for all Energy East common stock.

BNY Mellon Internet Address: www.melloninvestor.com

BNY Mellon’s Internet Website provides shareholders access to Investor Service Direct (ISD). Through ISD, shareholders can view their account profiles, stock certificate and book-entry histories,dividend reinvestment transactions, current stock price quote and historical stock closing prices. Shareholders may request a replacement dividend check, the issuance of stock certificates or the sale of shares from their Investor Services Program account.Shareholders may also utilize a live chat feature with a BNY Melloncustomer service representative during regular business hours as reflected below.

Shareholders may also contact BNY Mellon by telephone at 1-800-542-7480. BNY Mellon’s automated telephone service is available 24 hours a day, seven days a week. BNY Mellon’s customerservice representatives are available on regular business days between 9:00 a.m. and 7:00 p.m. (Eastern Time).

SHAREHOLDERS MAY OBTAIN A FREE COPY OF OUR FORM 10-K, WHICH IS FILED EACH YEAR WITH THE SECURITIES AND EXCHANGE COMMISSION, BY CONTACTING INVESTOR RELATIONS.

INVESTOR RELATIONS

Members of the financial community may contact Investor Relations by telephone at 207-688-4386.

TRADING SYMBOL: EAS

EAS is the trading symbol for Energy East Corporation common stock listed on the New York Stock Exchange.

ENERGY EAST INTERNET ADDRESS: www.energyeast.com

Information of interest to shareholders, including financial documents and news releases, is available at our Website.

PRINTING

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SUSTAIN

Energy East CorporationSummary Annual Report 2007

Energy East Corporation • 52 Farm View Drive • New Gloucester, Maine 04260 • www.energyeast.com


EAS_2007_annualreport

Economy & Finance

theconnecticut natural

new york state electric

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customers energy

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