Understanding Our

Energy Distribution Systems:

Gas Infrastructure and

Deliverability in New England

Richard Levitan, rll@levitan.com

March 5, 2014

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Agenda

Price Discovery During the Polar Vortex

New England’s P/L Infrastructure

• Marcellus shale E&P impact on supply / deliverability

• Decline in gas portfolio diversity -- pipeline economic

obsolescence

• Reduced LNG Imports

• Potential infrastructure expansion efforts

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Next Day Strip Prices, January 2014

TZ6 (non-NY) is VA/MB border to Linden, NJ

TZ5 is GA/SC to VA/MD border0

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50

75

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125

150

1/21/31/41/51/61/71/81/9

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Pri

ce (

$/M

MB

tu)

Transco-Z6 (NY)

0

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150

1/21/31/41/51/61/71/81/9

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Pri

ce (

$/M

MB

tu)

Transco-Z6 (non-NY)

(High, Low, Weighted Average)

Source: ICE

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Next Day Strip Prices, January 2014

(High, Low, Weighted Average)

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Pri

ce (

$/M

MB

tu)

Chicago Citygates

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Pri

ce (

$/M

MB

tu)

Dominion-South

Source: ICE

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Pri

ce (

$/M

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tu)

Algonquin Citygates

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Pri

ce (

$/M

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tu)

TETCO-M3

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Chokepoints Across the Supply Chain into the NYFS

January 6-7, January 21-23, 2014

Source: Pipeline EBB Critical Notice postings

Force majeure, 1/7

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Pre-Shale and Post-Shale Gas Flow Patterns

Pre-Shale Flow Patterns Post-Shale Flow Patterns

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Wet and dry shale gas production

Major Dry Gas

Production Area

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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0

2

4

6

8

10

12

Oct-

08

Jan

-09

Ap

r-0

9

Jul-0

9

Oct-

09

Jan

-10

Ap

r-1

0

Jul-1

0

Oct-

10

Jan

-11

Ap

r-1

1

Jul-1

1

Oct-

11

Jan

-12

Ap

r-1

2

Jul-1

2

Oct-

12

Jan

-13

Ap

r-1

3

Jul-1

3

Oct-

13

Ma

rcell

us

Pro

du

cti

on

(B

cf/

d)

Radical Change in Traditional Flows

Shale gas fundamentally altering traditional flows

• Long haul transportation from WCSB obsolete

• Marcellus gas supplanting gas from GoM and Canada

• Declining Sable Island production, uncertainty around

Deep Panuke

• Reversal of flow through

New York / Ontario

• LNG imports limited to

contract quantities,

periodic arbitrage

◦ Flexible cargoes to

EU or Asia

Source: Bentek Energy

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Interstate Pipelines Operating in New England

Algonquin

Granite State

Iroquois

M&N

PNGTS

M&N/PNGTS Joint Facilities

Tennessee

Interstate-Served Generator

LNG-Served Generator

LDC-Served Generator

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Interstate Pipelines Operating in New York

Algonquin

CNYOG

Columbia

Dominion

Empire

Iroquois

Millennium

NFG

Tennessee

Texas Eastern

Transco

Bluestone Gathering

Laser Gathering

Interstate-Served Generator

Intrastate-Served Generator

LDC-Served Generator

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LNG Import Terminals in New England

Algonquin

M&N

Tennessee

LNG-Served Generator

LNG Import Terminal

National GridService Territory

Boston

Mystic 8&9

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Northeast LNG Imports

0

5

10

15

20

25

2007 2008 2009 2010 2011 2012 2013

LN

G Im

po

rts

(B

cf)

Distrigas Canaport

Source: DOE Office of Fossil Energy, NEB

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Decline in East-End Supplies

0

5

10

15

20

25

30

35

40

45

50

0

50

100

150

200

250

300

350

400

2007 2008 2009 2010 2011 2012 2013

LN

G Im

po

rts (

Bcf)

Dis

trig

as S

en

do

ut

to A

lgo

nq

uin

(M

Dth

/d)

Distrigas LNG Imports

Distrigas Sendout to Algonquin

Algonquin Receipts from M&N

Source: DOE Office of Fossil Energy, Spectra Energy

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Constraints on West-End Supplies

0

200

400

600

800

1,000

1,200

1,400

1,600

Jul-09

Oct-

09

Jan-1

0

Apr-

10

Jul-10

Oct-

10

Jan-1

1

Apr-

11

Jul-11

Oct-

11

Jan-1

2

Apr-

12

Jul-12

Oct-

12

Jan-1

3

Apr-

13

Jul-13

Oct-

13

Jan-1

4

Natu

ral

Ga

s V

olu

me

(M

Dth

/d)

Capacity Throughput

Source: Spectra Energy

Algonquin Southeast Compressor Station (NY/CT Border)

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LNG Facilities in New England

Algonquin

Granite State

Iroquois

M&N

PNGTS

M&N/PNGTS Joint Facilities

Tennessee

LNG Import Terminal

LNG Satellite Tank

Augusta

Portland

Boston

Springfield

Hartford

New Haven

Providence

Concord

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LDCs Serving New England Generators

Algonquin

Granite State

Iroquois

M&N

PNGTS

M&N/PNGTS Joint Facilities

Tennessee

Bangor Gas

Berkshire Gas

Columbia Gas of MA

Connecticut Natural Gas

Maine Natural Gas

National Grid (Boston Gas)

National Grid (Colonial Gas)

National Grid (Narragansett)

Southern Connecticut Gas

Yankee Gas

LDC-Served Generator

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M&N Pipeline Facilities

Maine

Algonquin

Granite State

M&N

PNGTS

M&N/PNGTS Joint Facilities

Tennessee

Compressor Station

Interstate-Served Generator

New Hampshire

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Tennessee Pipeline Facilities in New England

Algonquin

Granite State

Iroquois

M&N

M&N / PNGTS Joint Facilities

Tennessee

Compressor Station

Interstate-Served Generator

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Concluding Thoughts

Loss of New England’s P/L portfolio diversity heightens economic

and operational risks

High basis and volatile gas prices likely here to stay until pipeline

enhancements alleviate congestion along traditional pathways into

the region

Existing ISO wholesale market design does not induce genco

commitments for firm transportation

Bulk power security during the winter is derived largely from oil

• Many oil generation plants at the local level are at-risk for retirement

• Combined cycle, gas turbine, and steam turbine generators on oil

cannot sustain the provision of ancillary services