NIMO TSC Customer Meeting

June 29, 2009 Syracuse

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First Annual Update

Section 9.4 of the Tariff requires an annual update to recalculate

NIMO’s revenue requirement (RR), system control and

dispatch (CCC), and billing unit (BU) components of the NYISO

TSC formula rate by June 14th for each upcoming year.

Section 9.4(b)2 of the settlement requires NMPC to hold a

customer meeting within 30 days of the Publication Date.

The purpose of the meeting is to explain the Update, to respond

to questions to the extent possible, and for Interested Parties to

identify concerns, to the extent known.

The First Annual Update Publication Date is June 11, 2009.

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Background: TSC formula

Wholesale TSC = {(RR / 12) + (CCC /12) + (LTPP / 12) – SR – ECR – CRR – WR-Reserved}/ (BU/12)

RR = Revenue Requirement

CCC = Scheduling, System Control and Dispatch Costs

LTPP = Net LBMP Transition Period Payment

SR = Direct Sale by the TO of Original Residual TCCs

ECR = TO Net Congestion Rents

CRR = TO Congestion Payments

WR = Wheels through and Export Transactions

Reserved = TO Congestion payments received per Section 2.3 of Attachment N

BU = TO Billing Units (MWh)

Today’s discussion focuses on these three specific components.

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Component Comparison

2008 2007 Delta

Historical $238.0M (2007)

Forecast $10.5M (2008)

Historical/RR $262.4M (2008) $248.5M $13.9M

Forecast $12.7M (2009) $12.7M

True-up $4.5M $4.5M

RR $279.7M $248.5M $31.2M

CCC $6.1M $5.5M $.6M

BU - MWH 37.0M 37.5M (.5M)

Indicative rate $7.73 $6.78 $.95

=

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Annual True-up

2008 2007 Delta

RR $262.4M $248.5M $13.9M

CCC $6.1M $5.5M $ .6M

BU - MWH 37.0M 37.5M .5M

Indicative rate $6.78 $6.78

BU * Indicative rate $3.4M $ 3.4M

Total True-up $17.9M

Times 50% & 50% $ 4.5M

Interest .05M

Total True-up $4.5M

=

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Factors Affecting Historical RR increase

Investment Base -$.9M

Debt Rate $7.3M

O&M Expense $2.2M

A&G Expense $3.3M

Revenue Credits & Rents $1.3M

Other $0.7M

Total $13.9M

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Increase in Investment Base

2008 2007 Delta

Transmission Plant $1,663.2M $1568.2M $95.M

General, Common, Intangible $82.8M $82.4M $ .4M

Total Plant $1,746.M $1650.6M $95.4M

Accumulated Depreciation -$571.4M -$561.1M -$10.3M

Accumulated Deferred Taxes -$174.2M -$156.3M -$17.9M

Regulatory Assets $ 25.5M $30.0M -$4.5M

Other $ 17.7M $17.9M -$.2M

Total $1,043.6M $981.1 $62.5M

Plant Additions Forecasted for 2008 = $72.M

Actual 2008 Plant Additions =$106M, Retirements & Transfers= $10.6M

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Plant Additions

Clay Station

EDIC New Scotland

Huntley Capacitor banks

New Gardenville

Harris Road substation

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Impact of 2008 Investment increase

2008 2007 Delta

Net Investment Base $1,025.9M $963.2M $62.7M

Other $17.7M $17.9M -$.2M

Total Investment Base $1,043.6M $981.1M $62.5M

2007 WACC 12.54% 12.54%

Due to Investment Base increase $130.81M $122.99M

Forecasted Tx Plant Additions $ 8.66M

$130.81M $131.65M -$.9M

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Impact of Debt Rate increase

2008 2007 Delta

LTD 7.44% 5.99%

Preferred .46% .44%

Equity 11.5% 11.5%

LTD weighted rate 3.68% 2.97% .71%

Preferred weighted rate .02 .02

Equity weighted rate 5.75 5.75

Federal tax gross up 3.11% 3.11%

State tax gross up .678% .688% -.01%

WACC increase .70%

Times 2008 Investment Base $1043.5M $7.3M

$600M of 7.75% Senior Notes matured 10/08, interest expense declined $9.3M

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Operation and Maintenance

2008 2007 Delta

Transmission Operation $26.2M $25.3M $.9M

Transmission Maintenance $35.1M $32.0M $3.1M

Mid Year Trend Adjustment $ 1.8M $-1.8M

Total Transmission O&M $61.3M $59.1M $2.2M

Increased due to increased maintenance program.

National Grid met it’s reliability standards in 2008.

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Administrative and General Expenses

2008 2007 Delta

Total A&G $36.2M $31.0M $5.2M

Deductions $16.0M $12.5M $3.5M

Subtotal $20.2M $18.5M $1.7M

Plus Pensions $23.1M $21.6M $1.5M

Total $43.4M $40.1M $3.3M

A&G Increases

Salaries $ .86M

Office Supplies $1.12M

Regulatory $ .25M

.

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ZONE 2008 2007 DELTA %

1 12,221,276 12,434,725 -213,449 -1.72%

2 7,481,174 7,584,829 -103,655 -1.37%

3 4,600,228 4,506,748 93,480 2.1%

4 10,627,106 10,777,510 -150,404 -1.4%

29 2,045,630 2,081,644 -36,014 -1.73%

31 711,186 799,277 -88,091 -11.02%

Total 37,686,600 38,184,733 -498,133 -1.3%

Billing Units - MWH

Most zones experiencing an economic declineZone 3 increase due to US Army - Fort Drum, and Newton Falls Fine Paper

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Other Business

A final Order in Docket No. ER08-552 accepting the

proposed settlement was issued June 22, 2009.

Refunds will be made no later than July 15th

“Phase-in” period ended June 30, 2009

Partial Year Rate Effective January 1, 2009 – June 30, 2009 = 5.69 RR CCC BU $201,065,318 5,001,254 36,247,418

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Questions