The New England Restructuring Roundtable

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• The New England Restructuring Roundtable
• Gas Pricing Dynamics Affecting
• Power Markets and Resource Adequacy
• in New England

Richard L. Levitan, rll_at_levitan.com June 15,
2012
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Primary Issues Concerns (next 3-5 Years)

• Supply push in PJM / NYISO ? demand pull in New
  England
• Slack deliverability during non-heating season
  insufficient to support new entry
• New flow patterns raise questions about economic
  obsolescence
• Anticipated retirement of many RFO / dual fuel
  steam units, coal
• Basis benefits will be indirect and may not
  materialize in the peak heating season
• Destination-flexible LNG cargoes jeopardize fuel
  adequacy around Boston
• Financial / regulatory support for new gas
  infrastructure
• Who pays?

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Commodity prices remain weak and stable
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Gas Price and New England Energy Price
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Blow out in historical parity relationship
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Marcellus Production Forecast
Source Penn State University
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Wet and dry shale gas production
Major Dry Gas Production Area
Wet Gas
Dry Gas
Major Wet Gas Production Area
Sources EIA, Pennsylvania State University
Marcellus Center, Dominion Resources,
Pennsylvania Department of Conservation and
Natural Resources
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Gas Basis to New England Reflects Congestion
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Marcellus-related planned projects
Source NGA
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Seasonal Basis to New York and New England
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Estimated P/L slack deliverability, except during
winter
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Gas Price Dynamics on DA / RT Prices

• EP outlook likely to sustain downward pressure
  on prices
• Generators bid value ? AGT Citygates, TN-Z6
• Existing paradigm does not capture M-T-M benefits
• FCA prices do not support new gas infrastructure
• Attrition effects by FCA 8
• Deliverability constraints likely to materialize
• Prices will reflect seasonal basis, ULSD
• Who bears the transportation freight?

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Gas Price Dynamics on Reliability

• Decline in LNG Imports to Canaport and Distrigas
• Concerns over adequate fuel to serve Mystic 8/9
• Gas flow displacement effects from western and
  Atlantic Cdn
• Coal and RFO steam unit retirements
• Posturing RFO steam units in the winter appear
  key to reliability
• ULSD oil tankage constraints and refill logistics
• No step-up to firm transportation
• How does the stakeholder process evolve?