In addition to electric infrastructure improvements, agreements between parties are being put into place to help alleviate existing problems caused by a lack of sufficient transmission. These include contracts with local energy generators such as BE, called Reliability Must Run contracts. They are necessary to ensure that local power generators are available when needed to produce adequate electricity for regions like Southwest Connecticut, where inadequate transmission infrastructure precludes importing less expensive power. As an additional financial incentive to ensure the operability of these plants, ISO New England Inc., the operator of the region’s bulk electric power grid, has filed a proposal with the Federal Energy Regulatory Commission to institute an enhancement to New England’s wholesale electricity marketplace, called Locational Installed Capacity (LICAP). A LICAP market is critical for the near- and long-term reliability of New England’s bulk power system.

Investing in Our Employees and the Communities We Serve
Our dedicated employees are the true backbone of UIL. They play a key role in generating ideas to improve our businesses. We are engaging our employees in designing and improving work processes that ultimately benefit our customers and shareowners. Their commitment to and focus on serving our customers are of inestimable value to all of us as shareowners and customers.

UIL values diversity in the workplace and its commitment is getting noticed. Earlier this year, UI was recognized as one of the 20 Noteworthy Companies for Diversity by DiversityInc. magazine. We draw our employees from a broad mix of backgrounds that represent the communities in which we live and work. We are committed to promoting a professional work environment built on respect and inclusion that recognizes the diversity of our employees, our customers, and our communities.

UIL companies also place a high priority on worker safety. In 2004, UI adopted the principles of the internationally recognized Dupont model for safety to ensure a safe work environment in all work areas. Xcelecom has implemented “best practices” safety and loss prevention programs across all of its companies.

Through our longstanding tradition of community support and corporate contribution, we are further demonstrating our commitment to the communities we serve. Our strategic alliances with leaders in business, academia, and state and municipal government allow us to play a significant role in improving our communities.

Investing in UIL
UIL had a very strong year in 2004. We succeeded because we stayed focused on shareowner value and committed to our long-term business strategy. Solid leadership and management allowed us to adapt to changing business conditions and economic uncertainty.

As we turn to the future, UIL’s overall picture looks bright. We are smart, long-term strategic leaders who clearly pay attention to our investments. We have a management team within each business that works hard and focuses on running their businesses strategically and with the highest ethical and business standards. Keeping an eye on the long-term value of our businesses and staying abreast of changing economic conditions in the regions we serve have made our stock well received in the financial markets. We have a clear understanding of the path we must follow to grow value in our businesses. Our course is set, our business model proven, and we’re positioned for success in the years ahead.

Nathaniel D. Woodson
Chairman, President and
Chief Executive Officer