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Executives

Jeff Kotkin - VP IR

Charles W. Shivery - Chairman of the Board, President, and CEO

Leon J. Olivier - EVP-Operations

David R. McHale - Sr. VP and CFO

Analysts

Maurice May - Power Insights

Ted Durbin - Goldman Sachs

Jonathan Arnold - Merrill Lynch

Neil Kalton - Wachovia

Northeast Utilities (NU) Q1 FY08 Earnings Call May 1, 2008 4:00 PM ET

Operator

Jeff Kotkin - Vice President Investor Relations

Thank you very much. Good afternoon and thank you for joining us. I am Jeff Kotkin, NU's Vice President for Investor Relations. Speaking today will be Chuck Shivery NU's Chairman, President and Chief Executive Officer; David McHale, NU's Senior Vice President and Chief Financial Officer and Lee Olivier, NU, Executive Vice President, who oversees our regulated businesses. Also in the room today is Shirley Payne, our Vice President and Controller, Jim Muntz, Head of our Transmission Segment and Jim Robb, Senior Vice President for Enterprise Planning.

Before we begin I would like to remind you that some of the statements made during this conference call may be forward-looking as defined within the meaning of Safe Harbor Provision of the US Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, which may cause the actual results to differ materially from forecast and projections. Some of these factors are set forth in the press release issued today announcing our earnings for the first quarter of 2008. Additional information about the various factors that may cause actual results to differ can be found in our Annual Report on the Form 10-K for the year ended December 31, 2007.

Now I will turn over the call to Chuck.

Charles W. Shivery - Chairman of the Board, President, and Chief Executive Officer

Thank you, Jeff and good afternoon. I know this week including today has been extremely busy for all of you as companies try to report their results in advance of the AGA conference. So we appreciate that you are joining us this late in the afternoon.

The past six weeks have been a busy time for us. On March 24th the FERC issues an order on rehearing concerning the New England transmission owners return on equity. A week later we filed a formal request with ISO-New England to study the benefits of a new north-south transmission interconnections within New England and a new high voltage overhead DC link to Hydro-Quebec.

First quarter of 2008 was a good quarter for NU. Today we released operating results that are consistent with our earnings guidance for the year, as well as with street consensus. Also we have continued to make very significant progress on completing our transmission upgrades in southwest Connecticut. By early next year we expect to report to you that in aggregate our $1.68 billion transmission upgrades in that congested part of New England have been completed on or below budget and that they were finished well ahead of the schedule we set out for you back in 2005.

Lee and David will provide you with more detail on our operations and on the quarter. Well I want to take a few moments to discuss a very important focus for us right now. That is our work to provide the states we serve and the greater New England region with a portfolio of solutions to address energy issues. Increasingly this work focuses not only on meeting environmental targets such as greenhouse gas reduction and renewable portfolio targets, but doing so in a way that will benefit our customers who are already suffering from among the highest energy cost in the country.

As we examine these issues and the potential for additional renewable and non-carbon emitting generation in our part of North America, we are struck by three realities. One, New England is already extremely dependent on natural gas fired units and that dependence is likely to increase, not decrease over the next few years.

Two, Southern New England in particular does not have the in-state resources to meet the renewable portfolio and low carbon emitting standards that it set out for itself. And three, Maine and New Hampshire offer significant untapped potential in the area of wind and biomass generation. Additionally there is vast potential in Canada that generate electricity without emitting carbon and a great willingness to sell it to New England.

Given these realities, we think there is a fundamental logic to tapping into the renewable resource potential of New Hampshire and Maine, as well as dramatically increasing hydro, wind and perhaps even nuclear power imports into New England over the next decade or two. We would expect this approach to lower the import of carbon based fuel into the region…

[Technical Difficulty]

Jeff Kotkin - Vice President Investor Relations

Thank you very much Christine. We're sorry, we lost our feed to Verizon [ph] so we are back in right now and I am going to reintroduce Chuck Shivery and Chuck is going to pick up from where we think we lost the feed about five minutes ago.

Charles W. Shivery - Chairman of the Board, President, and Chief Executive Officer

Thanks Jeff, I think where we ended up is we were talking about lot of the work that we have done to help improve the regions energy issues and I think the last comment, this is where I'm going to start is we were talking about, as we look at those issues and the potentially for new additional renewable non-carbon emitting generation. We're struck by three realities. The first one is, that New England is already extremely dependent on natural gas fired units and so that dependence is likely to increase not decrease over the next few years.

The second reality is that Southern New England in particular, does not have the instate resources to meet the renewable portfolio and low carbon emitting standards it has set up for itself. And third Maine and New Hampshire offers significant untapped potential in the area of wind and biomass generation. Additionally there is a vast potential in Canada to generate electricity without emitting carbon and a great willingness to sell it to New England.

Given these realties we think there is a fundamental logic to tapping into the renewable resource potential of New Hampshire and Maine, as well as dramatically increasing hydro wind and perhaps even nuclear power imports into New England over the next decade or two. We would expect this approach to lower the import of carbon based fuel into the region and potentially add more stability to the regions electricity cost. Thus since last summer we have been active in advancing the discussion about possible approaches that would best serve our customers and our shareholders.

We are willing to commit significant capital to help the region meet its energy goals. We hope to connect renewable generation to markets through the construction of new transmission facilities and our willing to work with the states to make it possible for us to build renewable generation for the benefit of our customers.

Many of those transmission and generation facilities will need to be built in Northern New England. New Hampshire already has identified the need for a new transmission loop in northern New Hampshire consistent with the states desire for 400 megawatts of new renewable generation in that area.

Given the challenges in the region on March 31st, we made a formal request to Viceroy New England to commence a study of the best ways to significantly increase the North South transmission transfer capability within New England. We ask that they include in the study as resource assumptions, 400 megawatts of renewables in Northern New Hampshire, new renewables in main and a new 1200 megawatt or larger line from the Hydro-Quebec system to central New Hampshire.

Access to Quebec significant energy potential could reduce location of marginal prices, reduce New England heavy dependence on natural gas and close a significant portion of the gap New England may face in meeting its energy standards. It could also improve overall reliability by creating a better tie with the Hydro-Quebec system.

We also asked Viceroy to study the feasibility of constructing, of constructing a 660 megawatt under sea link from coastal New Hampshire to the Boston area, a study requests have been supported by NSTAR and by Hydro-Quebec. There has been significant progress since we spoke with you on this subject last call. Over the next year we expect ISO to complete its work on studies that will provide insight on the best transmission solutions for meeting the regions needs. These initiatives are important to begin addressing the relatively high price of electricity in New England that is driven by a number of factors including the impact of natural gas power generation which often sets high prices for emerging [ph] nuclear and coal power that has been into the New England market.

Reliability must run payments to keep some older units online that are in load pockets in the region. These cost challenges will be exacerbated by new environmental requirements. If we can access increased renewable non carbon emitting resources through new transmission, we hope to provide significant benefits to the region. As we've mentioned previously, we have created a high level team within NU to pursue these opportunities.

Our success in siting and building our transmission projects attest to our ability to create positive working relationships with our neighbors, policy makers, contractors and suppliers. We expect to apply that experience to Northern New England in the next several years and we believe there may be significant developments in that area later in 2008. We will keep you apprised.

As you know, in February and March, we made filings in response to Connecticut's need for a new peaking generation. Lee will provide you with some details on Connecticut's current docket to review the filings. Regardless of whether or not our proposals are selected, we are pleased that the state has moved in this direction, something we had advocated for years. We know there are public service New Hampshire customers benefit from the hybrid merchant and cost of service generation model and we believe that Connecticut's cost of service peaking generation begins to create and can provide similar benefits to our CL&P customers.

Now let me turn the call over to Leo Olivier.

Leon J. Olivier - Executive Vice President-Operations

Thank you Chuck and everyone on the call for joining us here this afternoon. Before reviewing our operations in the first quarter, I want to follow up in some of the points that Chuck has just mentioned. Our future success in developing transmission related solutions to New England's Energy challenges will greatly be influenced for our track record in developing and completing today's major projects.

With that in mind, let's turn to what we have accomplished on our four major projects. The first of which Bethel-to-Norwalk has operated extremely well, since entering into service more than 18 months ago, reducing the cost of congestion in Connecticut over a $150 million during the first 12 months of operation.

To-date we have spent about $1.25 billion on those four projects. The replacement undersea cable between Norwalk-Connecticut and North Portland Island was laid in the first of this year. Final connections with substations are complete in Connecticut and New York. Burial of the cable in shallow waters on the New York side of the Long Island Town is ongoing.

The project is on time on budget and could be in service as early as June to help meet the summer's peak demand. Our $223 million Glenbrook cables project is about 79% complete. This 100% underground project will allow us to increase reliability and power flows deep into lower Fairfield County and despite some very challenging soil and rock conditions and a large amount of existing infrastructure it is on schedule to be in service by the end of this year. Our Middletown-to-Norwalk project continues to run ahead of our schedule. It is now about 79% complete and based on the current case of construction. We expect it to be in service in early 2009.

For every month we can finish the project before the end of 2009, will reduce the $1.47 billion cost of the project by approximately $4 million.

Through the first quarter of this year our capital expenditures totaled over $300 million of which about $200 million was for transmission work. We continue to estimate that our total capital expenditures will be approximately $1.3 billion this year, including about $700 million for transmission. Our next turn to the New England East-West solution or new set of projects, that sort of projects involves our construction of three new overhead 345 KV lines in Massachusetts and Connecticut, as well as associated substation work and a 115 KV rebuilds.

One of our projects will connect to our new transmission line to national grid meeting along the Rhode Island border. As I said in February the Greater Springfield Reliability Project may be the most complicated transmission project we've ever undertaken. We continue to work with ISO New England on the final design for the Springfield area solution, including the 115 KV underground cables. Our goal is to strike the right balance between reliability, operational flexibility and cost. We expect to initiate the siting process for the Greater Springfield Project in mid 2008.

The second project we expect to file with state authorities later this year is our Interstate Reliability Project that would run from our Card street substation in Lebanon, Connecticut 40 miles to the Connecticut- Rhode Island border, where it would connect with enhancements National Grid is designing now. This project traverses a rural part of Connecticut and the project is less complex than the Greater Springfield project.

The third new... part of news is the Central Connecticut Reliability project, which would involve construction of a new line between Bloomfield Connecticut and our Frost Bridge substation in Watertown, Connecticut. That line will provide us with another 345 KV connection to move power from southwest Connecticut where half of the states power is consumed. The timing of this project will be 6 to 12 months, behind the other two projects. So, we would expect to initiate the siting process in mid-2009.

As I mentioned in February, we have not yet adjusted our estimated cost for this entire family of projects from the $1.4 billion figure we provided you last year. I expect this figure will rise somewhat before we begin the siting process. We expect to provide the updated figure to you later this quarter. However, I should emphasize that during siding required changes in configuration to address local concerns could rise construction cost. Our current design for news contemplates no under grounding of 345 KV lines. As you know, building trend [ph] in 45 KV projects underground would increase cost. So this estimate could be altered during the siting process, similar to our experience with the southwest Connecticut projects. Operationally, our consolidated reliability measures were on target.

Yankee Gas's 1.2 billion cubic-foot LNG facility in Waterbury, Connecticut performed well. This past winter, on the highest natural gas demand day of the year by Yankee Gas in January of 2008, the inventory withdrawn from the LNG facility represented 11.7% of the total supply for that day. For the remainder of the heating season the LNG plant continued to maintain a capacity factor of a 100% and added 214 million Btu's or 20% of the tank storage capacity to meet Yankee's customer energy demand.

I should remind you that this facility can liquefy natural gas onsite. So even if prices for imported LNG continue to rise and become or becomes unavailable we will have the capability of filling the tank this summer from pipelines that connect to North American sources.

PSNH's generation had a solid first quarter with an aggregate base load capacity factor of 87.4%, it continues to provide PSNH customers with cost of service base load power that helps keep PSNH's generation rates the lowest in New England. We expect to provide you with an updated estimate later this year on the cost on installing a wet scrubber at the coal fired Merrimack station, which must be installed by mid 2013. As we've said before we believe that uptake will be higher than the $250 million estimate we first discussed about three years ago.

Earlier Chuck referenced our March 3rd proposal to build a total of 265 megawatts of peaking generation in Lebanon and Waterbury, Connecticut, in connection with the state solicitation for new peaking generation projects. We have proposed a four unit 200 Megawatt facility in Lebanon and a two unit 65 Megawatt facility in Waterbury adjacent to Yankee's LNG facility.

Earnings began on Tuesday this of this week. The DPUC is scheduled to issue a final decision by June 18th. At this time the hearings are currently in progress. If our projects are chosen and no legal or permitting delays are experienced, we would expect to have units in service by mid 2010, but even then generation would be a very small component of CL&P's earning stream.

Now I'd like to turn the call over to David McHale.

David R. McHale - Senior Vice President and Chief Financial Officer

Thank you, Lee. As Chuck mentioned NU's financial performance was strong in the first quarter of 2008, after the Con-Ed litigation settlement earned $88.2 million or $0.57 a share in the first quarter. Compared with earnings of $75.1 million or $0.49 a share in the first quarter of last year amounted to a 16% year-over-year increase in earnings per share.

This improvement was driven by our regulated transmission and distribution segment, where earnings totaled $86.3 million in the first quarter of this year. Up nearly 35% from the $64.1 million, we earned in those segments in the first quarter of last year. The most significant increase was in our transmission business, where our earnings totaled $32.5 million in the first quarter of '08, more than double what we earned in the first quarter of last year. This increase was due primarily to the approximately $800 million we have invested in the transmission projects during the 12 months ended March 31st, 2008.

That investment significantly increased our rate base to $1.57 billion at March 31st, '08, excluding of our $810 million of construction work-in-progress that has not yet in service. This amount in rate base is about 50% higher than the $1.08 billion transmission rate base at March 31st, 2007.

In addition, to a higher rate base our transmission segment benefited from higher AFUDC earnings of $4.4 million on the projects that will not into rate base until the new lines are in service, including that 50% of our Southwest Connecticut project. The transmission segment also benefited from our FERC order on rehearing concerning the return on equities allowed by the two New England transmission owners.

On March 24 FERC amended its October 31st, 2006 order by recognizing a calculation error and adding 20 basis point to the base ROE for transmission owners. It also reaffirmed, an additional 74 basis points beginning October 31st, 2006 in recognition of higher bond yields and an additional 50 basis points FERC allows transmission owners, which turnover operations of its transmission line to independent system operators, such as ISO New England. FERC did make some arbitration to the order concerning the additional 100 basis points allowed new projects that are part of the regional system plan.

The initial order allowed the 100 basis points on all projects in the plan. The order on rehearing allowed 100 basis points on projects completed and in service by the end of 2008. For products completed and in service beyond 2008, it requires transmission owners to file project specific applications for additional incentives, which can include items such as higher equity return, construction work in progress, and our recovery and investment projects that are abandoned.

In summary, then for our regional assets, which are completed and in service prior to December 31 2008, our overall return will amount to 12.64% rather than the previous level of 12.44. For assets completed and in service beyond December 31, 2008, we will be required to make additional plans for FERC to pursue ROE incentives. We think this that is good policy. FERC wants to ensure that there is a nexus between the incentives granted and the unique circumstances of the each project, such as size, new technology, complexity and financing our sighting, coordination across the multiple companies or multiple power affiliates.

Now we have been asked many times over the past several weeks, how this will affect NU - to start the additional 20 basis points are positive for us. In the first quarter of 2008, we recorded an after tax gain of $3.5 million or about $0.2 a share to reflect the

retroactive impact of the order back to 2005. Going forward all of our projects will receive the additional 20 basis points in their authorized ROE. However, some of our smaller more routine transmission projects, they go into service after December 31, 2008, will probably not received the additional 100 basis points, because they were not satisfied the FERC nexus cash.

For southwest Connecticut three of our four projects, Bethel-Norwalk, which is in to service in to October 06, the Long Island cable replacement and the Glenbrook cables project all should be completed by the end of this year and should be eligible for the incremental 100 basis points. In our view, we expect the Middletown/Norwalk line to qualify for the 100 basis point incentive as well.

As our future projects, we believe that the newest projects should clearly qualify for the incentives. The projects are large, complex, address congestion, reliability challenges, need to be coordinated with other major transmission owners, will require a significant cash commitments from us before they're in to service and we will require approvals from multiple states and agencies.

Later this year, we also expect to submit a filing with the FERC requesting incentives related to news. The transmission rate base forecast we have provided to you since EI [ph] last November include the assumption that news will be approved for 100% QF in rate base.

On balance then we believe this order will be somewhat earning accretive to our longer terms financial outlook given the additional 20 basis points on the base ROE and the fact that in our view much of our transmissions investment will qualify for the additional ROE incentive.

Near-term, our 2008 guidance for the segment remain between $0.75 and $0.85 a share. You may recall that we have raised guidance by $0.05 a share on both ends of the range in February. After we concluded the construction of our Middletown/Norwalk project, would remain ahead of its original schedule of 2008.

Now turning to our distribution business, I think the drivers were pretty well laid out in the earnings news release. The distribution segment earned $53.8 million or $0.35 a share in the first quarter of '08 compared with $48.2 million or $0.32 a share in the first quarter of last year. Two of our distribution company showed improved results in 2007, and two [ph] showed somewhat lower performance, to start with the two [ph] that demonstrated stronger performance. Those were PSNH, Yankee Gas.

PSNH earned $11.5 million in the first quarter of 2008 compared with $8.1 million in the same period of '07. The increase was primarily due to the... approximately $37.7 million permanent rate increase that took effect July 1st, '07 and then on a $3 million distribution increase that was effective January 1st, 2008, partially offset by higher operating expenses.

Unlike the other operating utilities PSNH's sales were essentially flat in 2008 compared with the first quarter of 2007. PSNH is trailing distribution, and generation ROE in composite was 9.8% for the 12 months ended March 31st 2008. We expect PSNH to achieve a regulatory ROE between 9% and 9.5% for the calendar year 2008.

Yankee Gas earnings rose to $18.6 million in the first quarter of 2008 from $13.6 million from the first quarter last year. The improvement was a result of $22 million July 2007 rate increase partially offset by lower sales and higher operating cost, including depreciation on the $108 million LNG facility Lee mentioned earlier.

Yankee Gas, firm sales were down 4.9% mostly due to a warmer than average first quarter, on a weather normalized basis sales were off 1.5%. I know many of you have begun to inquire about the increase in receivables or delinquent payments due to the economy. And while we have... we are monitoring this item closely and have seen some modest ageing of our receivables out of utilities it is not yet become a significant concern. As I said we continue to manage this aspect of our business closely.

The ROE for Yankee 10.2% for the 12 months ended March 31st, 2008. We expect Yankee to achieve a regulatory ROE between 9% and 9.5% for the calendar year '08, somewhat below, Yankee's authorized level of 10.1.

At CL&P first quarter distribution earnings declined modestly to $18.9 million in 2008 from $20.6 million in '07. Higher expenses including $2.5 million a month of an additional amortization expense that will affect CL&P all year, more than offset the benefits of $77.8 million annualized rate increase that did not become effective until February 1st.

CL&P sales were down 2.3% in the quarter, 1.6% weather adjusted compared with the same period of '07. CL&P's distribution ROE was 7.6% for the 12 months ended March 31st. We continue to project a distribution ROE for CL&P of about 8% for the calendar year '08 below it's 9.4% recently authorized by the DPUC. We expect CL&P's 2008 distribution net income to show a meaningful improvement over '07, due to the recent rate increase or growing rate base and higher equity capitalization.

Western Mass Electric's earnings were $4.8 million in the first quarter of 2008 compared with $5.9 million in the same period of 2007. A $3 million annualized distribution rate increased affective January 1st of 2008 was largely offset by a 2.2% decline in sales, 1.6% weather adjusted.

Additionally Western Mass experienced modestly higher operating expenses this year. On a trailing 12 months basis, Western Mass distribution ROE was 9.6%. We expect Western Mass Electric to achieve a regulatory ROE between 9% and 9.5% for the calendar year of 2008.

Overall we continue to forecast earnings in the distribution and generation segment of between $1.05 and $1.15 a share in 2008 compared with earnings of $0.94 a share in 2007.

Turning to our remaining competitive businesses. We earned $1.9 million in the first quarter of 2008 compared with $4.8 million in the same period last year. This year's results include a net after-tax charge of $3 million associated with the adoption of Financial Accounting Standard number 157, fair value measurements.

We continue to project breakeven results at our remaining competitive businesses this year. I should note that at the end of this month, the last of our wholesale contracts in the PJM pool was fired. Leaving a longer term obligation to a group of New York municipalities as the only remaining wholesale sales obligation.

NU parent and affiliates broke even in the quarter excluding the $49.5 million payment to Con Ed compared with a profit of $6.2 million in the first quarter of '07. The change is primarily the result of the parent company having more than $900 million to invest from both in the first quarter of last year, the result of proceeds from our November 2006, compared with generation sales and having very little excess cash to invest this year as those funds have been reinvested into our utilities over the last year.

We continue to project a loss of $0.10 to $0.15 a share in this segment in 2008, excluding the Con Ed settlement charge. As borrowing levels rise over the balance of the year and as apparent refinances are 3.3%... $150 million note that matures in June, and continues to invest equity in the utilities. For the year we continue to project consolidated earnings of $1.65 per share and $1.90 per share, excluding the Con Ed payment and between $1.45 per share and $1.70 including it.

As the cash flows and financing requirements we'll be heading into a financing window over the next couple of months to help finance their ongoing capital investment program later this quarter, we expect CL&P to issue $300 million of secured debt and for PSNH to issue $110 million of secured debt as a follow on. NU will issue up to $250 million of senior unsecured debt, part to pay off the $150 million issue I mentioned earlier. Finally, let me just touch on a couple of balance sheet and cash flow topics.

Total debt was just under 57% of total capital at the end of March. As we have noted earlier, we expect that trend to trend upward to about 60% by the end of the year. Also, our cash flows were relatively low in the first quarter doing part to the $49.5 million payments Con Edison, $85 million of regulatory under recoveries of refund primarily at CL&P and a timing difference in certain working capital item. We expect those items to partially reverse by the end of this year and estimate that we will generate between $450 million and $500 million in cash from operations.

Thank you very much for time and Jeff and I look forward to seeing many of you at the AGA conference next week in Florida. Now I will turn the call back to Jeff.

Jeff Kotkin - Vice President Investor Relations

And, I will turn the call back to Christine, Christine if you could give everybody instructions on how to enter questions.

Question And Answer

Operator

Thank you, sir. [Operator Instructions]

Jeff Kotkin - Vice President Investor Relations

We have question from Maury May from Power Insights. Maurice?

Maurice May - Power Insights

Yes, good afternoon folks, and congratulations on a solid quarter.

Jeff Kotkin - Vice President Investor Relations

Thank you.

Leon J. Olivier - Executive Vice President-Operations

Thank you.

Maurice May - Power Insights

My question has to do with the updated projected cost for the news projects. It's my understanding that there is a conference sponsor by ISO New England on May 19th, and that they are going to discuss the cost for the news projects. Should we get the cost from you shortly after this seminar?

Leon J. Olivier - Executive Vice President-Operations

Yeah, hi Maury, this is Lee. We as I've discussed we are working with ISO on this final design and should we conclude the final design for the Greater Springfield area, then we would be able to provide the updates for news, and I won't say the final updates because as you know as you go through the siting process that could change, but we would provide the next round of cost updates and those are consistent with what we have just said, at least $1.4 billion and likely to slightly increase. So, if we make enough progress, we'll have that ready by May 19th or slightly before.

Maurice May - Power Insights

Okay and the $1.4 billion that includes the Springfield project? Right?

Leon J. Olivier - Executive Vice President-Operations

That's correct. That will include what we have talked about is the Springfield underground cables as well.

Maurice May - Power Insights

Okay. And the Springfield underground cables are $350 million. Is that correct and that number is not expected to change, is it?

Leon J. Olivier - Executive Vice President-Operations

Well the project as we've described it before was $350 million. We could end up with a design that includes much of the aspects of what we have known as Springfield underground cables inside of the Greater Springfield design, so that design could look very, very different to the point where we solve it through upgrades of the 345 K/V and other upgrades on 115 KV systems.

Maurice May - Power Insights

Okay. Now, I don't want to sound stupid here, but just to go over one more thing, the Springfield underground is 350 which is part of that 1.4.

Leon J. Olivier - Executive Vice President-Operations

That was part of that $1.4 billion.

Maurice May - Power Insights

And, I thought the 350 was a fairly hard number but you're saying that there may be, the design changes that could actually increase that.

Leon J. Olivier - Executive Vice President-Operations

Yeah, I think what I'm saying is that if you take that project, if you solve the project through a bigger design of the Greater Springfield, the only project for 345 K/V and 115 KV. Then what we have known as the cables could be part of that design. It would still be in total more than the $1.4 billion, but the design solution would be a different design solution then we described before.

Maurice May - Power Insights

Okay good. Thank you very much.

Jeff Kotkin - Vice President Investor Relations

Thank you. Maurice. Our next question is from Ted Durbin from Goldman Sachs. Ted?

Ted Durbin - Goldman Sachs

Yeah, hi. I have a question for you about, when you would actually complete the Middletown and Norwalk projects specifically but the other ones as well? How bigger of an impact would that make if you were to complete those before the end of this year versus early next year in terms of returns?

Leon J. Olivier - Executive Vice President-Operations

Well, I'll just go over the capital and Dave can talk a little about the earnings impact on that but as we've said, for every month on average that we finish the project early, it takes about $4 million of cost of the project from AFUDC cost. So, realistically that could take $30 or $40 million of cost off that budget, it could, based upon the current pace that we are making with the project. Dave you may want talk about any earnings impact?

Yeah, and as Chuck indicated the other two projects both the Glenbrook cables project which was scheduled to be done this year will be done this year, and we expect that to finish basically right around that cost of $223 million. And, the Long Island cable replacement project will finish for a cost of total of about $72 million for the NU portion of that project.

David R. McHale - Senior Vice President and Chief Financial Officer

Then I would only add that there may be some modest upside overall on earnings, but because the acceleration of the project actually reduces the carrying cost of that. You've got a small amount of CapEx even though you are actually getting it completed in service earning some OAF you just see and alike so. There may be some positive benefit but in the fiscal year '08 not a tremendous amount.

Ted Durbin - Goldman Sachs

Okay and I think I heard you say that, you would assume that you would receive that the 12.6% even if you were completed in early '09.

David R. McHale - Senior Vice President and Chief Financial Officer

That is our view and if it was completed in 2009 our sense is that would require a separate dialogue and potentially an application with the FERC.

Leon J. Olivier - Executive Vice President-Operations

Yeah, and Ted I would say that, the way that project is working much of that project would be in service by the end of this year. You're probably talking $600 million to $650 million of that project will be in service. Part of that project, the first major segment, segment-1 is already in service, as well as one of the major switching station. So much of that can be put in service over the course of this year, which would leave approximately about $400 million to go into service in early 2009.

Ted Durbin - Goldman Sachs

Okay, great and then probably next question is on the distribution side. Where are you in your thinking in terms of filing your next round of rate cases, given sort of where your ROE levels are? Given that it looks like sales growth has actually been pretty weak at least in the first quarter. Just may be you explain your thinking on that?

David R. McHale - Senior Vice President and Chief Financial Officer

Yeah, let me first touch on that last point. Ted, I think it's instructed to know what we actually expected for sales growth and what was sort of driving guidance and alike. I say that the experience at... for western Massachusetts is not inconsistent with what we expect to going forward as we sort of developed our plans for the year down about a 1%, 1.5%. CL&P had more of a flat expectation probably where we see a little bit more erosion's at PSNH we expected sales to be up about 2%. So even at flat we're sort of running, running under there.

On rate case strategy, I think it is safe to say that you'll not see this organization file rate cases at least that's our existing view in the year 2008, its likely that in 2009, we will begin a new cycle of distribution rate increases, which means generally we filed for rates that will be in service, very late in the year or more likely at the first of January 2010. And that's something that we continue to strategize, but I think it's safe to say that 2009 will be a year of filing as opposed to a year in which we actually get rate relief across all of our utilities.

Ted Durbin - Goldman Sachs

Okay and then if I could just do one more. Where is the Connecticut staff coming up, right now in terms of the various peaker proposals. Have you had a sense from them in terms of which one they might be favoring or what they are looking for?

Leon J. Olivier - Executive Vice President-Operations

Those hearings are ongoing right now and I think it's too early to say what that outcome will be. The AG's comments and the OCC comments ranked us I think either number three or number four. Its part of the hearings that are ongoing right now, I think we have provided some additional information that perhaps would have the staff reconsider that. Part of the rankings where are the generators located for instance and giving additional credit for generators located in southwest Connecticut.

The fact of the matter is when you finish the Middletown-to-Norwalk line it really doesn't matter where you put the generator. And if you look up, the fact that our proposal at least the one in Lebanon is solely fuel oil and when you look at the spreads between oil and gas they are closing and also I think they probably estimated too much time in terms of the plant actually being in operation. We think that plant will be used very sparingly and therefore what you want is the lower overall capital cost, which we think our proposal stacks up quite well. So we're looking for a decision on that around the middle of June timeframe from the DPUC.

Ted Durbin - Goldman Sachs

Okay thanks very much.

Leon J. Olivier - Executive Vice President-Operations

All right

Jeff Kotkin - Vice President Investor Relations

Thank you Ted. Our next question is from Jonathan Arnold of Merrill Lynch. Jonathan?

Jonathan Arnold - Merrill Lynch

Hi good afternoon

Jeff Kotkin - Vice President Investor Relations

Hi.

Jonathan Arnold - Merrill Lynch

Just wanted to ask a question on the, well we missed some of the calls waiting in and out and then we had to jump off. I apologize if you, if you may have a very specific on this. That the timing of your update that you're planning to give on news, are you saying that there could be an adjustment to the numbers before you go ahead with siting and then it maybe further adjustments as you more through the siting process or you still, you intend to still to kind of do this in one go?

Leon J. Olivier - Executive Vice President-Operations

Yeah Jonathan, now this is Lee Olivier. Very similar to what we previously did with the South West Connecticut projects. You update... we will update, hopefully update the project on May 19th at the Planning and Advisory Committee leaving ISO-New England. I say hopefully we're working through some final details on what that final design would look like for ISO-England now.

We'll update that project and what we will do is we'll update it for the current cost of materials, of labor. We will also put in that a, an inflator for the years of construction and then you should go through the siting process to the tune that changes are made on the project and you get the so called ISO-England technical approval the I39. Generally speaking from our past experience what happens is, as the cost of the project goes up as a result of those changes. Either cars buy more equipment that needs to be added based on ISO's review or the fact that you end up under grounding or taking some other mitigation action associated with the project.

So, our experience has been, is to those projects increase and then as we go out for the competitive bids, we will provide another update at that point in time. So, if the prices of materials and labors goes up that will be reflected in the project.

Jonathan Arnold - Merrill Lynch

Do you anticipate here despite the May 19th, meeting where you have communicate something with the street around the time of that or will people need to go? How will that?

Leon J. Olivier - Executive Vice President-Operations

That will be communicated through the 8K process.

Jonathan Arnold - Merrill Lynch

Okay. And were they affiliated in a [ph] open meeting of the ISO effectively.

Leon J. Olivier - Executive Vice President-Operations

Well, we would actually in our likelihood Jonathan have the 8K out before the meeting.

Jonathan Arnold - Merrill Lynch

I see

Leon J. Olivier - Executive Vice President-Operations

Because our presentation would be posted, I think its three days before, 72 hours before the actual meeting.

Jonathan Arnold - Merrill Lynch

So, the meeting is on May 19

Leon J. Olivier - Executive Vice President-Operations

Yes

Jonathan Arnold - Merrill Lynch

And we may learn it before that That's what you are saying?

Leon J. Olivier - Executive Vice President-Operations

That's correct.

Jonathan Arnold - Merrill Lynch

Okay. And one other thing, I was, I don't know if you can talk about this at this point, but just generally speaking, I know you have been able to show with prior projects the impact on congestion is such that customer is actually at least neutral and potentially went from having the new investment in transmission? Is this project or the series of projects, something you expect to be out and to say same thing about the kind of cost numbers were likely to be looking at?

Leon J. Olivier - Executive Vice President-Operations

Yeah I do. I think, when we look at the congestion essentially to and from Connecticut, in other words versus Connecticut versus the rest of the region of the differential MNP prices, there is probably $150 million saving somewhere between $100 and $150 million of savings. That the project can eliminate in terms of congesting cost or MNP cost, differential MNP cost.

The other aspect of this is, is that if you go back to Chuck's discussion on bringing renewable energy into the region, the only way you can get that renewable energy into Connecticut in the volume that you need to make a difference to meet things like registration RGGI and RPS is through the new transmission lines that we would built as part of the news project. So, from that standpoint it is absolutely needed both for reliability and to solve the whole host of other energy issues in the state.

Jonathan Arnold - Merrill Lynch

With 100 to 150, to be, that's purely just congestion as opposed to these renewable benefits?

Leon J. Olivier - Executive Vice President-Operations

Now that - yeah that would not include any renewable benefits and that those numbers I'm using are pretty good estimates right now. And of course, as you know congestion can change in any given day as a result of various circumstances.

Jonathan Arnold - Merrill Lynch

And those numbers, you've been part of your previous filings or that's more of kind of a up to date number?

Leon J. Olivier - Executive Vice President-Operations

I think in terms of the congestion, we haven't filed any numbers on congestion. Those are, that's kind of the behind envelope math that we've done on what we see in terms of the differential pricing both in Connecticut and the rest of the region.

Jonathan Arnold - Merrill Lynch

Thank you very much

Leon J. Olivier - Executive Vice President-Operations

You are welcome.

Jeff Kotkin - Vice President Investor Relations

Thank you Jonathan. Our next question from Neil Kalton from Wachovia, Neil.

Neil Kalton - Wachovia

Good afternoon everyone. Just a question, it seems like the lines in Northern New England are moving along a little bit faster and there is a lot of motivated party, so to speak but, I think in the past you discussed upon the challenges, you'd have pulling down power especially from the Northern Canada is the inability of United States to enter into long-term contracts? And, I wanted to know, if there has been any movement on that front at the state level? What kinds of hearings are being held with rating? And, what it would take, would it take a change in legislation or at the commission level?

Charles W. Shivery - Chairman of the Board, President, and Chief Executive Officer

Neil this is Chuck. There actually was a movement in that direction in Connecticut where there was some legislation pass that allows to enter into long-term contracts. The commission currently has defined that as about four years. That may not be long enough, if we are talking about bringing power in to Connecticut, so it would require potentially some legislative, but certainly some regulatory changes to do that. We are having conversations with variety of other stake holders now around those projects, and I think we will continue to do that during the rest of this year. Our goal as we said a while ago was to have a specific project that people could actually analyze associated with cost and benefits before the end of this year.

Neil Kalton - Wachovia

Okay. Thanks.

Jeff Kotkin - Vice President Investor Relations

Thank you Neil. Well, we don't have any more questions. I want to thank you for joining us today. Thank you for bearing with our, through our little interruption early in the call. If you have any questions please give us a call either later this afternoon or tomorrow and David and I, as David mentioned will be down at AGA conference starting on Sunday. So have a good weekend everybody, and we will talk to you.

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