Anthony J. Vallillo

President and Chief Operating Officer,
The United Illuminating Company

Foundation

The foundation of our enterprise is strong. Our management team, seasoned and experienced in the industry, achieved a number of successes this year that delivered financial benefits. An incentive rate filing decision issued in May by the Federal Energy Regulatory Commission (FERC) allowed the Company to include 100% of construction work in progress (CWIP) in its rate base for our Middletown/Norwalk Project. In addition, a 50 basis point incentive adder to return on equity on the advanced technology portion of the project, about 50% of the total construction cost, was also granted by the FERC. Also of note were the final payment, $4.6 million, received from the City of Bridgeport for the Steel Point property, and the successful issuance of $175 million of senior notes during the year.

Planning

We launched a 10-year, $1.75 billion capital expenditure plan to support robust infrastructure and customer needs. By upgrading aging infrastructure, adding capacity to meet peak demand and ensuring standards compliance, customer needs are being met in a manner consistent with our transmission and distribution focus. By more than tripling our transmission rate base, these investments will add consistent long-term value for shareowners. The upgraded and modern infrastructure will ensure customers of reliable service for years to come. The Middletown/Norwalk Project, with an approximate cost of $265-$285 million, is a major component of this plan. The project is more than 70 percent complete and is expected to be in service in 2009.

not only challenges but opportunity. Just as UI effectively addressed the challenges presented by earlier energy efficiency requirements, so shall we address today’s issues of climate change and the high cost of electricity in our state.

A first step in accomplishing this is the partnership UI formed with NRG Energy to file a plan to build peaking generation. Developed in response to 2007 Connecticut legislation requiring peaking generation on a cost-of- service basis, our comprehensive proposal is under review by the Connecticut Department of Public Utility Control (DPUC). If selected by the DPUC for construction, our approach will provide more efficient generation at a lower cost. It will do so with lower emissions than resources presently in place, plus meet the vital need for new peaking generation in Connecticut. UI will also explore opportunities to help the state meet its renewable requirements and to lower our customers’ electricity prices by aggressively pursuing the