Bruce Johnson, Director, Energy Efficiency,

1
Bruce Johnson, Director, Energy Efficiency,
AGA Rate and Regulatory Issues Conference
Webcast EARNING ON NATURAL GAS ENERGY EFFICIENCY
PROGRAMS MAY 23, 2008 200 p.m. 330 p.m. EDT
2
National Grid has been and will continue to focus
on Energy Efficiency
We are committed to cut our own emissions by 60
by 2050 a target beyond what is required by the
Kyoto protocol and we call on other companies to
do the same. Steve Holliday, CEO of National
Grid

• The largest distributor of Natural Gas in the
  northeast U.S. serving approximately 3.4 million
  customers in New York, Massachusetts, New
  Hampshire and Rhode Island
• Delivers electricity to approximately 3.3 million
  customers in Massachusetts, New Hampshire, New
  York and Rhode Island
• Manages the electricity network on Long Island
  under an agreement with the Long Island Power
  Authority serving 1.1 million LIPA customers

3
National Grid Gas Programs Offered in MA, NH,
NY/LI and RI
High-Efficiency furnaces and boilers can save 25
to 40 on annual fuel bills in addition to
reducing air pollution.
Weatherize homes
Water Heater
4
National Grid Gas Programs Offered in MA, NH,
NY/LI and RI
CI High Efficiency Heating Program
Custom Audit
s
Standard Thompson, Inc. - Waltham, MA Heat
recovery from Two150 HP natural gas engine driven
air compressor
Waltham High School Five Aerco condensing boilers
_at_ 2 mmbtu each replaced three oil fired boilers _at_
10 mmbtu each
5
National Grids Gas Energy Efficiency spending is
expected to double from 2007-2012. Electric
spending will almost triple.
6
National Grids Efficiency Programs Benefit
Customers and the Company

• Customers who participate
• Lower total bills
• Reduced operating costs
• Access to trusted technical expertise and
  financial assistance
• Assistance in meeting environmental objectives
• National Grid
• Stronger long-term relationship with customers
• Performance-based Shareholder incentives -
  provide added incentives to promote efficiency to
  customers
• Improved reliability of distribution system
• Supports our environmental commitment

7
Performance-based Shareholder Incentive Mechanism
- MA

• 3 Components
• Savings Mechanism
• Value Mechanism
• Performance Metrics
• Target incentive amount is equal to 5 (after
  taxes) of actual program expenses in the period.
• Incentive is capped at 110 of the design level
  incentive.
• Must achieve at least 75 of the component target
  before an incentive can be earned for the
  component.

8
Performance Based Shareholder Incentive Mechanism
- RI

• Incentive based on achieving the approved natural
  gas savings goal by sector
• Must achieve at least 60 of the approved goal or
  no incentive is earned
• Incentive rate is 4.4 of the approved spending
  budget for the period

9
Performance-based Shareholder Incentive Mechanism
- NH

• Incentive based on achieving target savings and
  b/c ratios by sector
• Must achieve at least 65 of target savings
  before being able to earn on savings
• Must achieve a b/c of at least 1.0 to earn an
  incentive for cost-effectiveness
• Target incentive amount 8 of the sector
  budget
• Incentive capped at 12 of the sector budget

10
Upstate NY Shareholder Incentive Mechanism
Proposal

• Proposed incentive mechanism incorporates a
  sharing of net benefits. Customers retain 85 -
  90 of achieved net benefits. Shareholders
  retain 10 - 15 of achieved net benefits.
• If the Company achieves at least 75 of targeted
  net benefits up to 100 of targeted net benefits,
  it will earn an incentive equal to 10 of
  achieved net benefits.
• If the Company achieves less than 50 of targeted
  net benefits, it will be subject to a penalty
  equal to 10 of the difference between 50 of
  targeted net benefits and achieved net benefits.
  
• If the Company achieves between 50 and 75 of
  target net benefits, it will not earn an
  incentive or be subject to a penalty.
• If the Company achieves more than 100 of
  targeted net benefits, it will be entitled to
  earn an incentive equal to 15 of achieved net
  benefits.

11
2007 Performance-based Shareholder Incentives
Earned