New England Electricity Restructuring Roundtable The Electric Utility

New England Electricity Restructuring Roundtable The Electric Utility of the (Near? ) Future David R. Mc. Hale EVP, Chief Administrative Officer Northeast Utilities June 27, 2014

NU Overview NU serves 525 cities & towns throughout New England; Massachusetts, Connecticut and New Hampshire Providing reliable electric and natural gas service to 3. 6 million electric and natural gas customers Comprised of: • Four electric companies • Two natural gas companies • One three-state electric transmission business 2

Current State Delivering Reliable Energy Superior Customer Service 3

Utility of the Future The “utility of the future” will evolve to support an environment of clean energy, an integrated grid and customer engagement • • Generation Cleaner, more sustainable energy Distributed energy resources Energy security and independence Competitively priced • More resilient • Smarter • Integrated The Grid • Knowledgeable • Empowered • Self-reliant Customers • More sustainable • Decoupled and repriced • Incentivized Business Model 4

Utility of the Future Drivers Utility of the future is driven by a convergence of energy policies, market shifts, technology advancements and rising customer expectations Increasing customer expectations Emerging disruptive technologies and digital strategies Shifting end-user consumption patterns “Utility of the Future” Drivers Market changes that will require a “two-way” modern grid Rising energy prices and delivery constraints Clean energy mandates and subsidies 5

U. S. Electricity Demand Trends One key driver is the projected low growth in electricity consumption in New England the rest of the US U. S. Electricity Demand — Rate of Growth Source: EIA Annual Energy Outlook 6

The Quest for Cleaner Generation The quest for low-carbon and renewable energy resources is driving significant change throughout New England power markets CT & MA Greenhouse Gas Emission Targets Millions of tons of CO 2 20% reduction 125 111 75% reduction • Massachusetts and Connecticut have statutes which call for a reduction in carbon emissions of 80% by 2050 (from 1990 baseline) • Equally, the States have aggressive renewable portfolio standards; 22. 1% by 2020 for MA and 27% by 2020 for CT 28 CT MA 7 • There exists a significant gap between installed renewables in the region and longer term requirements

Attributes of the Modern Grid Development of a modern grid will require investments to make it resilient, smart and integrated Resilient § § § Asset hardening to protected against weatherrelated events, particularly flooding and severe winds Smart § § Integrated Self-healing, line and substation automation § § Two-way power flows Situational awareness during outages and “blue sky” events § Advanced metering capability § § Electric vehicles Pro-active vegetation management and tree clearing § Enterprise-wide outage management capabilities Protected from physical and cyber threats § GIS asset and locational mapping; mobile workforce technology solutions Distributed energy resources and micro-grids New products, services, market entrants Underlying goal of increasing system and capital investment efficiency 8

Engaging and Empowering Customers Leading-edge customer engagement capabilities through tailored solutions, data analytics and digital/social media channels The Launch of New Customer Engagement Platforms Generate Actionable Customer Insights Personalize Inbound Customer Interactions Personalize Outbound Communications Resulting in… “Personalized Ways to Save” and an Improved Customer Experience Increased Energy Efficiency Program Participation Continuous Customer Engagement and Satisfaction 9

Regulation of the Future The “utility of the future” will require “regulation of the future” to ensure alignment among policy makers, customers and investors “Utility of the Future” “Regulation of the Future” Modern Grid Operating Environment • Modest sales growth Smart Technologies • • Price pressures • Increasing expectations Integrated Solutions Customer Centric • • • Higher reliability demands New market entrants Grid independence Security threats 10 Re-examine cost allocation, subsidies, rate-making principles Rate design and pricing Metering policies Cost recovery Performance incentives and metrics Alignment

NU’s Solutions for the Future (and Today) Investments in additional transmission capacity to enable low-carbon and clean energy sources Investment in additional gas pipeline capacity and related infrastructure Advance and modernize the electric grid to drive reliability and situational awareness Continued investment in energy efficiency with emphasis on innovation, financing and tailored customer solutions Engage and empower customers through innovative partnering, tools, analytics and social media Explore new regulatory business models and approaches, including pricing alternatives Future State Mission – Reliable Energy and Superior Customer Service 11