Mediated Modeling Feb' 22, 2006

1
Mediated Modeling Feb. 22, 2006

• CVPS Power Supply
• Implications of Credit Problems

2
Good Old Days vs New RealitiesMarkets

• New England Power Pool
• Single system dispatch
• Shared Savings
• Cost Based Power Market
• ISO-NE Power Market
• Spot and Bilateral Market
• Competitive bid spot market
• Poor credit adds to costs

3
Good Old Days vs New RealitiesBricks/Mortar vs
Contracts

• NEPOOL
• Utility owned power plants
• Jointly owned-units with wheeling rights
• Long-term contracts
• ISO-NE
• IPPs buy assets
• Open Access wheeling
• Short-term contracts
• Mark to market/Collateral calls

4
New Realities

• Financial woes
• California problems
• Bankruptcies
• Counter party credit worth concerns
• Poor credit ratings for utilities
• Collateral calls
• Cash up front
• Contract liabilities with few assets

5
Power Supply Strategy

• Near-term liability reduction
• Market price
• Short-term
• Hedging is expensive
• Long-term solutions
• Acquire generation assets
• Build, own operate generation
• Wires only Separate Power Supply entity

6
Modeling

• Vertically integrated utilities poor credit
• Short-term spot market
• No price difference for renewables
• Vertically integrated utilities strong credit
• Portfolio
• Mixed contract lengths
• Owned units
• Renewables
• stable lower cost
• Development risks