Welcome to the Northeast Utilities Second Quarter Earnings Conference Call. All participants will be in a listen-only mode until the formal question-and-answer session of the conference. [Operator Instructions]. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Your host for today's call is Mr. Jeffrey Kotkin, Vice President of Investor Relations. Mr. Kotkin, you may begin.

Thank you. Good morning and thank you for joining us. I'm 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's Executive Vice President and Chief Operating Officer. Chuck is joining us from the Annual Energy [ph] conference in California. Also with us today are Shirley Payne, our Vice President and Controller; and Jim Muntz, Head of our Transmission Segment. Before we begin, I'd like to remind you that some of the statements made during this conference call may be forward-looking as defined within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risk and uncertainty, which may cause the actual results to differ materially from forecasts and projections. Some of these factors are set forth in the press release issued Friday, announcing our earnings for the second quarter of 2008, as well as in the slides packet we have posted on our website to accompany this call. If you have not yet seen those slides, they are located in the Investor section of www.nu.com under presentations and webcast. Additional information about the various factors that may cause actual results to differ can be found in our annual report on Form 10-K for the year ended December 31, 2007. Additionally, our explanation of how and why we use certain non-GAAP measures contained within both our news release and the slide packet and in our most recent 10-Q and 10-K. Now I will turn over the call to Chuck.

Jeff, thank you. Good morning and let me also thank you for joining us. We are pleased with the success we've achieved on behalf of both our customers and our shareholders during the first half of this year, particularly given the economic and energy cost environment in which we operate. In fact, as a result of these successes, we have raised our earnings guidance for 2008. But before Lee and David provide you with details on our year-to-date results, I want to comment on recent public policy initiatives in New England as well as the advances in our own strategic initiatives. As we discussed before, I firmly believe that this company will continue to succeed with an achieved result that benefit our customers, and are consistent with public policy directives of our political and regulatory leadership. Although New England faces many challenges, the environment in which we operate also provides many opportunities. Our success in building transmission is Southwest Connecticut is a [indiscernible] point. On July 29, ahead of schedule, we energized our solid core replacement cables beneath Long Island, completing a more reliable high voltage connection between Connecticut and Long Island that will also have better environmental profile. In early 2009, we expect to place in service the last of our four major transmission projects that we began discussing publicly in 2001. These projects are making Southwest Connecticut's transmission system far more robust and reliable and have enabled grid operators to depend far less frequently on older, inefficient, more costly and less environmentally friendly plants to serve loads in a region that consumes half of Connecticut's electricity. These projects also have been the most significant factor in our improved financial performance in the recent years, creating a strong alignment between customers and investors. We expect the largest and final…

Thank you, Chuck and good morning. So far 2008 has been a good year for NU's operation performance and the execution of our capital deployment plan. I will start with operations. We are meeting our system line reliability goals, and we are on or ahead of schedules in all of our major infrastructure projects. Our annual CapEx program of $1.3 billion is essentially on target, where transmissions pending being slightly ahead of schedule. However, distribution spending is slightly behind, primarily due to the slowing economy. We expect our distribution capital expenditures to the end of this year to be about $35 million below our budget. Turning to generation; our base load coal and wood generation at PSNH was available 98% of the time, when prices in New England were the highest. And we expect to meet our generation capacity back to targets of the year. In transmission, as Chuck mentioned we are now projecting completion of all four major Southwest Connecticut projects by the first quarter 2009, 9 to 12 months ahead of the original schedule of December 2009. We also project that together the four major projects will be less than our original estimated cost of $1.68 billion we have been discussing with you over the past several years. Here is an overview of the status of those major projects. The Long Island cable replacement project into the service on July 29 and provides a much more reliable link between Norwalk-Connecticut and Northport, Long Island. This project was constructed jointly with Long Island Power Authority and our share of the cost to $72 million. The only remaining work on this project is to complete cable burial on the New York side of the Long Island Sound in September, which will require a brief outage. Of our remaining two Southwest…

Thank you, Lee and thank you everyone for joining us. There are two great positive items that I wanted to discuss this morning. First, financially, we had a very strong second quarter as well as a very strong second half of 2008. Second, because of those results and our confidence about the second half of the year, we raised consolidated earnings guidance for 2008 by $0.15 a share on the low end of the range and $0.05 a share on the high end, resulting in a new range of $1.80 to $1.95 a share that excludes the first quarter Con Ed related litigation charge. I will discuss the components of our revised guidance in a moment. Turning to our financial results, as shown on slide 4 we earned $57.8 million or $0.37 a share in the second quarter of '08, up 19.2% from the $48.5 million we earned in the second quarter of 2007. In the first half of the year, as shown on slide 5, earnings excluding the first quarter after tax litigation charge of $29.8 million, were $146 million or $0.94, up 18.1% from the $123 million or $0.80 per share we earned last year. The primary driver for the results was our transmission segment, where we earned in the second quarter 35.2 million, up 66.8% from the $21.1 million we earned last year. For the first half of the year, transmission earnings were at $67.7 million, up 83% from the $37 million we earned in the first six months of 2007. The driver for the transmission earnings growth was the dramatically increased investment on facilities, particularly in Southwest Connecticut. Our transmission rate base including 50% of our capital expenditure today on the three newest lines in Southwest Connecticut totaled $1.77 billion at the end of June, compared…

And I am going to turn the call back to Christine, who can tell you how to enter your questions. Christine? Question And Answer

Thank you, sir. [Operator Instructions].

Thank you. Our first question today is from Anthony Crowdell from Jeffries. Anthony?

Good morning. Just wanted to know if you could talk a little about the blended ROE in your transmission business and what do you guys see as the blended ROE when you look at all the projects together at the end of '08 and also at the end of '09?

Anthony, this is David. Let me try and just address that. I think in the past, we've talked about 12%, moving up to 12.1%, maybe a little higher over the life of our five-year numbers that we shared with you. I think we've gotten at least one kind of constructive regulatory order, maybe a couple since that time including that 50 basis point adder for our technology associated with MN. I don't think it's enough to move that number dramatically at this point, so we'd see still in that 12%, 12.1%, 12.2% and that's subject to the intensive filing that will take place later this year at for our NEEWS project. So we'll kind of keep that number in place for the time being, we'll update you on EEI. Any update will be driven around our views on the NEEWS incentives.

Great. Thank you.

Alright.

Next question is from Ashar Khan from SAC. Ashar?

Hi, good morning. Dave, just going back, could you just tell us, what the transmission CapEx is going to end up in '08 and what it is going to be in '09. Based on the comments in... I guess you said you are running faster. I am trying to understand how CapEx is shifting around in this current or next year?

Sure. Let me have Leon kind of tackle that for you.

Yes. If we look at... Ashar, if we look at '08, we'll spend about $700 million in '08, and in '09 about $350 million in '09.

$350 million that's total?

Totalin transmission.

Okay. I had it down as 506 in a previous slide. So it's going to be lowered now by 150?

Ashar, I think when you say 506, you are referring to the projection that we gave at EEI in November of 2007, when we had the earlier schedule for MN, is that correct?

That's probably correct. Okay. That's what I have, and probably that is correct. Okay, that's been amended of course?

Yes that's correct and at EEI we'll give you a new schedule of that 2013.

2013. Okay. Thank you.

Thanks a lot. Next question is from Jonathan Arnold from Merrill Lynch. Jonathan?

Good morning.

Good morning

Just following up on the discussion on sales that David just made, wondering if you could be a little more specific about what... how much in the first half is slower than expected sales of had to your impacted earnings. Say, realize this several ways and which that you've shielded. And secondly, what of all kind of assumptions around sales we made for the second half in the distribution guidance, were you changing it too much. And the earnings impact of that assumption?

Got it, let me kind of tackle that second piece only because with respect to your first question. We really don't have that level of specificity that we'd kind of share in that detail around our disclosures, necessarily. But let me kind of tell you about what our thoughts are for going into guidance. And obviously, we kind of lower the top piece of that guidance from 115 to 110, driven on our use of sales. And even though I think there is a certain elasticity to sales, I hope you'll gather from our rate making mechanism that we all detect it from a revenue recovery. That said, right now, we see that when you weather normalize CL&P's to sales and think about what's going on, going forward we probably continue to see that type of performance that is going to underperforming what we had originally thought going into the year in that sort of same timeframe. So, I think weather normalize were down about 3.5% this year, we would expect to see that trend going forward. I think one of the things that we sort of studied just from a behavioral standpoint is weather later this summer or this month as consumers experienced really warm weather, weather that really turndown their air conditioning when its gets hotter a number of consecutive days, we've done some recent polling of our residential customers and one thing that they tell us is, they are being more proactive in watching their thermostats more closely on those one day and on cool days. So, we'll see if that persists. But I think in the guidance, we see this type of sales experience going forward. I think we see this... similar is of at PSNH, not a lot of strength in, their sales environment is better. It's about flat on a weather normalized basis. As there is some erosion further erosion going forward we continue to be concerned about our Western Mass jurisdiction, primarily because from an economic standpoint and from an operating standpoint they are the weaker of our customer base, and I think their response may be a little bit more negative going forward, and we do all see some firming at Yankee Gas. So, the weak spots, Massachusetts, I think you can expect similar trends for CL&P and PSNH that we are seeing so far.

Thank you.

Alright. Next question is from Maury May. Maury?

Yes, good morning folks. Congratulations on a good quarter.

Thank you.

Question on the Massachusetts energy regulation that was just signed by the governor last month. I am unclear as to the utility recovery of the possible cost of 50 million... I am sorry 50 megawatts for state, is it going to be rate based, is it going to be owned and leased, how are utilities going to recover there?

Maury, this is Lee Olivier. The legislation really leads it up to each utility to be able to basically file a plan on how much photovoltaic it will take that would want to build and what is the recovery mechanism. So, it's not determined whether that goes into essentially distribution rate base or you create a separate rate base with a different return on equity associated with it. So that's something that we are looking at now.

Okay. And that 50 megawatt for the state so what would WMECO's share of that be, I guess it would be a small share?

That's actually 50 megawatts per utility.

Oh, really okay.

Yes, so each utility could build up to 50 megawatts.

Okay. And what's your best estimate for a kilowatt of solar these days, $5,000 still a good number?

It's around $6,000 is the last number that I saw without any other subsidies from directly from some other source.

Okay, okay good. And how would this be instituted? Would customers' request solar on their roofs and would the utility then install it and maintain it and essentially put it into the entire rate base?

Yes, we are putting together a plan that addresses that. But essentially, customers could request it.

Okay.

And a customer will get a kind of a lease fee for allowing us to install solar on their facility. We could install solar on our own facilities as an example and connect it to the grid. So, there are a number of ways to do that.

Would it possibly be socialized upon the entire rate base?

Across the state?

Well, across the... let's say the service territory of each utility?

It would be socialized across the service territory of each utility.

Okay, great. Thank you, Lee.

You're welcome.

Thank you, Maury. Next question is from Paul Patterson from Glenrock. Paul?

Hi guys.

Hi Paul.

Just a little bit more on the rate case expectations in 2009. What kind of ROE I mean I guess in the middle of 2009, your expectation is that your ROEs will be at that point an appropriate point to go in and get relief, is that... I mean could you give us a little bit of a flavor for the range in ROE that you think that might, just generally speaking obviously nothing like specific, but just in general what will happen to the ROE in 2009?

Well, I think right now if our strategy stays the course here and we are filing in 2009 and I mentioned that we are hopeful that the Yankee may not be in the harbor quite yet, but for the electric companies that puts 2008 as the test year and if you look at a test year in and which you heard me rattle off the ROEs, you're kind of a mid-8 in some cases depending on how utilities adjust for the numbers, and there is no further rate relief for 2009, although in some cases like CL&P we've got a rate increase coming at February 1, you've got continued pressure on these returns. That's the bad news. So you're going to go into these cases with a test year that's weak and then a filing year in which it is... the trends are getting increasingly negative and I think that's the backdrop by which you have this dialog. As well as for CL&P in particular; still very, very meaningful capital expenditures going forward. We know that commission has been supportive of our reinvestments in the aging infrastructure, so all the dialog around the type of investments, the degree of investment, how much maintenance CapEx you want to do on this system. That too is the backdrop for our cases going forward.

With Connecticut Light & Power, I got the ROEs that you guys are generally sort of expecting for PSNH and WMECO. What is for Connecticut Light & Power, sorry, I just got distracted, momentarily?

For the Light & Power company?

Yes.

In 2008, we said we'll be in the about 8% range. We haven't given any specificity yet for 2009, haven't given our earnings guidance around 2009. That's something we'll talk about a little bit later in the year.

And it said, it's going to be 2008. I guess the question still comes up why not going in a little bit earlier? I mean because it's going to take sometime to get through the process of what have you or you follow me as opposed to wait until the middle of 2009?

Yes I do follow you. And I think that's something that we're studying pretty carefully, given this sort of climate that we're in. But it's definitely not out of the question, Paul.

Okay. And then the equity issuance, I didn't get the size of that, that you were sort of expecting to do against near the end of 2008?

In today's remarks, I didn't mention the size. In the past, we've talked about it given the projections around rate base, CapEx and the like, given our leverage range of 60%. We probably have to issue about $0.5 billion over the next five years. And we said in the past, half of that could come in 2009; maybe half a couple of years later. That too for the subject to update when we consolidate kind of our new strategic view later this fall, but those numbers aren't out of the question by any means. If you had $250 million in your models for 2009, I think you're going to be in a lot of company with where I think the street is right now.

Okay, no change. Okay then, just finally on the distributed generation side there, which was I guess one of the big drivers for the lower industrial usage. Where you see the demand is, is pretty much the low hanging fruit in that area sort of already taken by the industrial customers or did you see... where do you see the trend in that going, I guess it's mostly Connecticut with the law there, is that correct?

Yes, Paul it is, and mostly in Connecticut. Although as Chuck intimated, there is the opportunity for more distributed generation in New Hampshire, with the recent legislation, the distribution company can build up to 6% of its peak demand load and that would be over 150 and 120 megawatts for instance with PSNH in New Hampshire. So we expect more distributed generation in New Hampshire, we expect that we will be proud of that and build that, there is heavy emphasize on that legislation in renewable. So it could be photovoltaic in New Hampshire because it's a very good area for a wind part. In terms of Connecticut, there are still some more opportunity there, probably the biggest one recently was the Kimberly-Clark facility that went commercial in terms of their distributed generation this year, fairly large load. A lot of the other major places like UTC are already on essentially in-house generation. But there is a number of other smaller application for high-rise buildings and industrial parts that still remain inside of the state.

Any perspective of how this with a load management program, the conservation that you are seeing, there is also I guess the peaking generation that I guess is... I forgot... I apologize if I missed this, where that's going in the DPUC. What that might do with the demand supply balance in the wholesale market?

Well, I think what's the... all of our studies and the RRP that is put together by us not eliminating and is now currently being reviewed by the Connecticut Energy Advisory Board, basically tells you that there is no more need for additional base load generation. So if you factor in the RRP that the DPUC put out a couple of years ago, which was for about 800 megawatts and this other one which is for around 600 megawatts of peaking generation, and if you factor in no retirements of existing plans, Connecticut has a lot of older plans, 40 years older, so that really essentially don't run. So most of the revenues are created through the forward capacity market, you don't need base load; you won't need any more peaking plants, and commit a lot of current years, what happens to those existing plans that are old, and sit idle for the most part. Of course the other part of it is when NEEWS is built, NEEWS brings in additional transfer of capacity into the state, it would adds another 1200 to 1300 megawatts of transfer capacity to bring power in from places like New Hampshire and Massachusetts. So build out of base load generation in the long-term will probably not be strong inside of Connecticut.

Thanks a lot.

Alright, thank you Paul. Our next question is from Steve Fleishman from Catapult. Steve?

Yes. Hi gentlemen.

Steve?

Hi, there. Couple of quick questions, first on the transmission guidance change, could you maybe give some sense how much of the change is related to the higher ROE versus essentially the higher rate base and completion of the spend earlier than expected?

Steve, this is Dave. I think clearly most of the change in that guidance is driven by the FERC ROE decision that retroactively kind of reached back and gave us more value from past year as well as more value in 2008. So that was probably $0.03 of it, you sort of think about it that way. The accelerated spending this year and the success of having bring projects nearer to completion along with the number of other items, smaller items is the balance of it.

Okay. That was $0.03 out of $0.10, so it's probably more the higher spend this year?

It is really what we are doing around Middletown-Norwalk, putting that in position to come into service very early in 2009.

Okay. My question is just, I know Chuck at the beginning mentioned a little bit about the NEEWS project and the initiatives with Canada, Northern New England and just do you think by the end of this year or maybe by your EEI meetings we will have better definition on your potential opportunities there, and maybe even some of kind of contract arrangement?

Steve, this is Chuck. I would hope that while we get to that point in time in the year, let's say November EEI, we've gotten some more definition around what might be possible and can have a more wholesome discussion around that, so that's a pretty good timeframe.

Okay, thank you.

Alright, thank you Steve. Our next question is from Ted Durbin from Goldman Sachs. Ted?

Hi, all my questions have been asked, thanks.

Alright, very good. Well, we don't have any more questions; if you have any more you want a follow up, please give us the call later this morning or this afternoon. Just want to thank everybody for joining us. Thank you and have a good day.