Welcome to the Northeast Utilities Q2 Earnings Call. My name is Sandra, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr. Jeffrey Kotkin. Mr. Kotkin, you may begin.

Thank you, Sandra. Good afternoon, 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; Lee Olivier, NU Executive Vice President and Chief Operating Officer; and David McHale, NU Executive Vice President and Chief Financial Officer. Also joining us today are Jim Muntz, President of our Transmission Group; and Jay Buth, our Controller. Before we begin, I'd like to remind you that some of the statements made during this investor 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 risks and uncertainty, which may cause the actual results to differ materially from forecast and projections. Some of these factors are set forth in the news release issued yesterday. If you have not seen that news release, it is posted on our website at www.nu.com. Additional information about the various factors that may cause actual results to differ can be found on our annual report on Form 10-K for the year ended December 31, 2010, and our 10-Q for the first quarter of 2011. Additionally, our explanation of how and why we use certain non-GAAP measures is contained within our news release and in our most recent 10-K and 10-Q. Now I will turn over the call to Chuck.

Thank you, Jeff. And I'd like to thank all of the investors, who are listening to our call, for joining us this afternoon. Let me start by noting that NU had a good second quarter and a very strong first half of the year, both of which were consistent with our full year 2011 earnings guidance. As you can see in our news release from last night, earnings per share were up 25% in the first half of 2011 over the first half of 2010, excluding merger-related costs. In light of the results of the first half of 2011 and our prospects for the full year, last night we raised the floor and, hence, the midpoint of our guidance for full year results. For 2011, we now project earning between $2.30 per share and $2.40 per share, excluding merger expenses. As busy as the first half of the year has been, the next 6 months should see a number of very positive events. During the second half of the year, we expect to consummate our merger with NSTAR be in full construction mode on our Greater Springfield Reliability Project, bring key elements of PSNH's Clean Air Project into operation, announce a new route for the northern section of our Northern Pass project and achieve the financial performance that supports our updated earnings guidance. Our confidence in projecting near-term financial performance is enhanced by the fact that, for the first time in more than 2 years, we do not have either a distribution rate case pending or one that is about to be filed. We continue to make good progress on the major events facing the company, our merger with NSTAR. In the past 3 months, we have achieved a number of milestones. In May, Maine regulators signed off on the…

Thank you, Chuck. Our operating performance was quite good in the first half of the year and has remained strong since the start of the summer. We had 2 major weather events in June, which caused significant damage and to which our organization responded very well. On June 1, a damaging tornado tore through the city of Springfield. In the following week, 3 days of thunderstorms accompanied by high winds knocked out power to approximately 300,000 of our customers across 3 states. In both cases, the vast majority of customers had their power restored within the first 36 hours. Our prompt response to outages, along with outstanding call center performance, mitigated long protracted service restorations and drew praise from state and local elected leaders. In total, we spent about $17.8 million in restoration activities following those storms. More than $15 million of that, which has either been capitalized or applied against our major storm funds. Pretax storm-related costs actually fell by about $5 million in the second quarter of 2011, as compared with 2010. We believe our customers appreciate the improvements we have been serving them. In the most recent JD Power survey of utility customer satisfaction, all of our electric utility scores improved, and Yankee Gas remained the highest ranked mid-sized natural gas distribution company in the northeast. Our $430 million Clean Air Project, a wet scrubber being installed at our 2-unit Merrimack coal-fired station, is ahead of schedule and currently 86% complete. System tie-ins, startup and commissioning activities are expected to begin in the fourth quarter of 2011, and the scrubber itself could be operational by the end of the year. The [indiscernible] project should be completed by mid-2012. You may recall that the scrubbers required -- is required under New Hampshire's mercury reduction law, which was enacted…

Thank you, Lee. Our results for the first half of 2011 reflect many of the same favorable trends we've seen since the middle of 2010. They include improving distribution results as rate increases and cost control measures have allowed our returns to recover from last year's low levels, favorable transmission earnings as we continue to invest in our infrastructure and a decline in the competitive business earnings as those businesses, particularly the Wholesale Marketing business, winds down in 2013. As a reminder, those results are now folded into our NU parent and other companies' business segments. As Chuck noted earlier, we have raised the lower end of the distribution segment guidance in the NU consolidated guidance by $0.05, effectively raising the midpoint of NU's earnings guidance for the year. Our new range of $2.30 per share to $2.40, excluding merger costs, reflect the results we have experienced in the first half of 2011. The warmer temperatures and storm expense we have experienced in July and our prospects for the balance of the year, including the progress we are making on our major projects particularly the Greater Springfield Reliability Project and PSNH's Clean Air Project. In fact, the progress we are making on our transmission program this year is expected to result in us earning toward the upper end of our transmission guidance. I will discuss our updated guidance in more detail shortly. Overall, we earned $77.3 million in the second quarter of 2011 or $0.44 per share compared with $71.9 million or $0.41 per share in the second quarter of 2010. Over the first 6 months of 2011, we earned $191.4 million or $1.08 per share compared with earnings of $158.2 million or $0.90 per share in the first half of 2010. Excluding charges related to our merger with NSTAR,…

And I'll turn the call back to Sandra so she can remind you of how to enter your questions. Thank you, Sandra.

[Operator Instructions]

All right. Thank you very much. Our first question today is from Greg Gordon from ISI. Greg?

Two questions. First, the pushing back the start of the expected construction date for Northern Pass. I mean, specifically the extra 12 months, what do you think that's going to, that that extra time is going to allow you to accomplish? I mean, specifically what parts of the negotiation or what issues have you slotted in for being resolved over that incremental time period?

This is Lee Olivier. It's really about 9 months. And what that 9 months will do is -- if you think about the 180 miles, we need to do a couple things. One, we've got to secure the right-of-way. We have 180 -- 140 miles secured, so we'll be working in the northern communities where we need to secure another 40 miles. So we'll be tracking with municipal officials, landowners and so forth and other key stakeholders in that area. And we have to do the environmental assessment. We have a contractor that will put together an environmental assessment that looks like 2 seasons. It looks at both kind of spring and fall. And we've already started that on the first 140 miles on the existing right-of-way. We'll be turning over that data and information fairly soon to the DOE third-party contractor that will evaluate it. And then once we finalize the last 40 miles, we will conduct whatever additional environmental studies we need to do on that last 40 miles. So the additional time allows us to do the environmental analysis over 2 seasons and also work in the communities to build consensus and to line up the rights-of-way through that last 40 miles. And as I've said in my discussion, we're making very solid progress on that.

Great. My second question is with regard to the time line in getting the final decision in Massachusetts. It's just it's not completely clear to me how the resolution of the pending proposal from the DOER will take place. I mean, is it possible that the commission will just rule, and in the context of approving the merger, just say, "Yes, we looked at that, and didn't think it was necessary." Or do they have to make a separate independent ruling on his motion at some point between now and when they make a final decision?

Greg, this is Chuck. I think your first suggestion is clearly something that could happen. They could simply wrap the DOER motion into the final ruling, and have a final ruling that just is comprehensive. They could wait and -- or could take the position that they want to rule on the DOER motion. But either one of those is possible.

Okay, so it's just not clear in terms of milestones, whether we will get a separate ruling or whether we'll just hear nothing until they make a final decision.

Yes, that's -- I think, Greg it is positive that they have -- the hearings have concluded, and they have set the schedule for the briefings. So as you know, I think David mentioned that reply briefs are due by September 19. So at least we're moving forward, I think, on that schedule. The commission than has the time, whatever time it needs to make a final decision. But as I said earlier in the script, we believe that, that is a sufficient decision -- sufficient time to make a decision and allow us to close the merger before the end of the year.

Thank you, Greg. Our next question is from Justin McCann from Standard & Poor's Equity. Justin McCann - S&P Equity Research: You have already discussed the wind [indiscernible] negotiations for the last 40 miles of the Northern Pass transmission project. But could you explain precisely what is specified by the Eminent Domain Bill in New Hampshire? And then one more question, could you then discuss the projected timeframe for the wind power projects that are in development, as well as for company decisions related to potential influx?

Okay. In regards to the Eminent Domain Bill that was in the New Hampshire legislature, as you may recall, the eminent Domain Bill was approved in the House of Representatives and was then sent to the Senate. And in the Senate, it was essentially moved to re-refer, which means it's essentially stable. And the Eminent Domain Bill, what that would have done is essentially it would have precluded the right of eminent domain for any other project other than essentially reliability based projects. So if that was the case, then it would be very difficult to develop any other renewable resources inside of New Hampshire, so we thought that was discriminatory. So it sits over in the Senate in re-referral. And at some point in 2012 when the New Hampshire legislative session is back in which is in the January timeframe, they will take it up sometime in that session, could be at the beginning, could be up the end. In regards to wind development in New Hampshire, if you could just elaborate a little bit more on that, Justin, I would appreciate it. Justin McCann - S&P Equity Research: Well, I was thinking, it's like your -- you have potential sites in Vermont parts of New Hampshire and also in Maine. And I'm just wondering what kind of timeframe you have regarding decisions regarding the development of those sites, if you decided to do so.

Yes, in regards to actual wind development right now, Northeast Utilities does not have any ongoing wind development in any of the northern 3 states. As Chuck indicated, we have renewable development in solar in Massachusetts and a to-be-determined 10 megawatts of renewable in Connecticut. The wind developers in the north are all essentially commercial competitive enterprises, and what we do there is a system, as necessary, to make interconnections through their wind development, most notably in New Hampshire. And we actually are working on some now in Western Massachusetts in the Berkshires region.

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

The customer migration decision that happened in New Hampshire, how does that work out going forward? Do you recover from existing customers? What's the sort of the thought process since that order came in?

Well as stated. As it stands now, the order sort of directs us to when we file our next energy supply rate, which is the rate from July 1, 2010 -- 2012, going forward. We will pro forma into that rate all of our costs of service and, of course, all our fuel recoveries and the like, both for our own generation and for the market generation. And at that time, they also directed us to propose various rate design mechanisms that could potentially address some of these migration issues. So that's really our next step, is to begin to work with the commission and make some proposals in the fall of this year.

Okay. So is there any, is there sort of a regulatory balance that you guys are keeping as a result of this? And since you -- I mean, I assume that you -- this amount that, I guess, is being recovered at this moment, correct?

Well, all amounts at this point are being recovered through our customers. And if there's an under- or over-recovery, those monies are trued up in the subsequent ES filing. So there's no recovery issue per se.

And I would add, Paul, that PSNH serves about 99.8% of its residential customers as of June and about 50% of all the commercial customers. So there is still a large customer base that buys their power directly from PSNH.

I got you. The weather normalized. You guys did mention that perhaps it was decreasing, but normal weather -- weather normalized usage was fast declining a little bit more than what I, if I got you correct, I don't know If I completely heard it right, before, I think last quarter, you thought it was going to be sort of a flattish kind of situation. Could you just elaborate a little bit more on what that means and, I guess, what's sort of driving that?

Paul, again, it's David. We had made a statement when we set sort of direction for 2011, our guidance, that it was premised on a number of underlying assumptions that we try to bring current with the Street, and one of those is sales growth. And we have said general observation has been -- since 2005, we have seen demand disruption or negative load growth, if you will. This year, we actually had a little bit more optimism going into the year and thought that weather-adjusted sales would be flat. And we did see, right out of the blocks, some negative prints even though we had seen a little bit more favorable results, maybe in the spring. Our actual observation now and what we said in the call is weather-normalized sales were down 0.5%. So it's certainly better than the last 3 to 5 years of trend but not based on what we thought going into the year around projection. That said, the delta between flat sales and being down 0.5% is not a major earnings driver for this year. And as you know, our Massachusetts utility now has revenue decoupling, so it sort of neutralizes that issue. I think it's no surprise that we're going to stop short of calling for a double dip for sure, but no surprise that the New England economy and our economies have not reaccelerated in terms of growth, in terms of job creation, in terms of housing and the like. So you have more economic, sort of -- fundamentally more economic weakness than we might have hoped for 6 or 9 months ago. And I think, on top of that, you do see, and Lee mentioned this, you do see fuel switching, which means customers who are going to DG were losing electric load, although we have a nice hedge, and now we're picking up gas sales at Yankee Gas. So you're seeing that type of activity. And you are seeing policies that are trying to incent customers to move in that direction, whether it's large commercial customers or even smaller customers who are installing solar. And then I think, second, another fundamental trend, which I do not see sort of seizing by any means is states incenting utilities and providing more monies to fund conversation, load management and DR [ph] programs. In fact, you may know that, throughout New England, these programs have not only funded in rates by distribution companies but by proceeds from the Reg E option and proceeds by the FCM option. So there are monies flowing into demand response, and as the efficiency that are also putting downward pressure on our sales.

Just also finally, the smart meter. Was there finally a decision at the DPUC or, I guess, the DEEP as it's is called now? Any -- did that ever get decided? And what's driving it?

Paul, this is Lee Olivier. That has not yet been decided yet. There is currently not a schedule inside of the current PURA organization to make a decision on EMI Smart Grid.

Thank you, Paul. Our next question is from Ashar Khan [ph] from Visium.

So Lee, can I just, going back to what you said, should this 9-month delays, so should we just proportionately take, like, 75% of numbers? And the majority of the spending was in '13, '14, '15 and just move them, like, one year later? Is that a good benchmark, I guess, with little change to CapEx?

Ashar, yes, I think that's a good way to position the numbers, essentially shifting them over by one year because the type of work that will go on now will just be -- will just move out another year.

Thank you, Ashar. Our next question is from Jonathan Arnold from Deutsche Bank. Jonathan?

A quick question on Massachusetts and where you are in the stage, in the process with the merger. Is it still kind of possible procedurally that the settlement could emerge on these issues? And then sort of second part to that question, the DOER seems to be focused on sort of trying to address NSTAR rates beyond their current rate plan. And then is it conceivable that all these things could get wrapped up into something that might sort of precede the merger?

Jonathan, this is Chuck. I think, with respect to any settlement, and obviously we don't speculate on settlements or at this point in time. But you could if there was a settlement that was reached, it obviously would be part of the merger process, I think, that the DPU would have to deal with. With respect to the DOER issue, first of all, we don't believe that the motion is appropriate. We think the process that we've gone through, with weeks of hearings of over 1,000 interrogatories, have in fact proven the standard, which is as you know, a net benefit standard at this point in time. And that we would hope that the Massachusetts DPU would not look favorably on that motion.

Right. And let me ask on another topic. I believe you still need the NRC, and it seems to be kind of caught up in some technicalities. Any sense of how that might play out and what sort of timeframe?

Yes, we think that the NRC approval will be forthcoming and will be forthcoming on a timeframe that it will not delay the merger. The technicalities that, I think, you're referring to are the foreign ownership issues. And as you know, we own a portion of essentially the spent fuel pools of 3 power plants, hence the NRC requirement. We don't believe that foreign ownership issue is really the merger issue. And we would hope that the NRC would come forward with their decision on the merger irrespective of the foreign ownership issue.

Is there a schedule for this? Or it's just handpicked?

No, there's no schedule, but as I said a little bit earlier, we think we will have that decision from the NRC in a way that would not slow down the merger approval.

Thank you, Jonathan. Next question's from Travis Miller from MorningStar. Travis?

What were the storm costs in the second quarter? And what have they been through July so far?

Storm cost in second quarter. Well, for the second quarter's -- storm costs were lower in the second quarter by $5 million over the second quarter of 2010. And I think we’ve spent essentially $22 million year-to-date in major storms. Again, $14 million of that was capitalized. I think those are -- is that it Dave? I don't know if you have any more refined numbers.

No, I think those are fine, Lee.

Yes.

Okay, $14 million capitalized and then $8 million as expense, year-to-date? Okay.

Yes. And as I said, in terms of the actual O&M storm expenses that affect earnings were about $5 million on them.

Thank you, Travis. Next question's from Chris Ellinghaus from Williams. Chris?

David, can you quantify what the CL&P transmission true-up was in the quarter?

Yes, and just for comparative, and I've said it's probably worth repeating, I mean, just the nature of the scheduled '21 tariff. Every second quarter, we go through this true-up process, up sometimes a fairly small number, sometimes it's a little bit more meaningful. But just by way of, I guess, facts, in the second quarter of 2011, it actually lowered our earnings by $1.1 million. In the second quarter of 2010, it actually increased our earnings by $2.8 million. And just a little history, in Q2 of '09, it would have been an increase of $1.5 million. So there is sort of a pattern and a history. It can swing either way, but those are the numbers. So it's basically a $4 million swing between '11 and ‘09.

Okay, great. And those are pretax?

No those are earnings numbers.

Okay. Your O&M year-to-date, are you on track for -- or can we believe that that's sort of the run rate for the rest of the year?

Well, I admit that it's a little tough to decipher O&M run rates, looking at our income statement, given all the accounts that actually run through that. But I'll tell you that the O&M run rate this year is, it really in good standing. We've had very good sort of cost controls on the basic fundamentals of the business. Where we have had some ownings and increases they’ve generally been funded by the regulators around programs or enhanced reliability, as an example. And even if you look at some of the trouble spots, Chris, around, say, on collectibles, we have a very good trend there. And that's pretty much in check at this point, although it continues to get a lot of attention.

Okay, great. If my recollection is correct, I think, last year in the third quarter, you were suggesting that maybe you had about a $10 million pretax benefit for weather last year, is that correct?

Yes. I think, Chris, it was. If you looked at the third quarter of last year versus a normal third quarter, it was about, after tax, it was about $7 million or about $0.04 a share. So if we had had an average summer last year, third quarter earnings would have been $0.04 lower.

Okay, great. That's consistent with what I've got. Would it also be fair to say that, while we were all probably planning for weather, that at this point it looks like you won't get all the way back to normal if sort of the trend from July holds forward?

Yes, I think that's a fair statement. We're not -- we're tracking close. As I’ve said we're down 0.5% of sales and probably driven by the economy are going to have to accelerate. And if you look at where we've seen the fall-off, as I said that's in commercial, we don't see at this point a reemergence of our commercial class of customers. So I think that's a fair statement, Chris. We probably won't get back to flat, but we'll bring you current at the end of the third quarter.

Thanks, Chris. Our next question is from David Paz [ph] from Merrill Lynch. David?

Just going back to Northern Pass, just could the CapEx there be revised with an alternative route?

David, this is Lee Olivier. Based upon everything that we see right now, we still think that $1.1 billion is a good number. The final disposition on the capital is really driven by the siting process. So when you get through the siting process, and you're ready to start construction, you do kind of a true-up or reestimate of the labor and materials of the project and whatever workarounds, and that gives you kind of the final look. Right now, we think that $1.1 billion number is good, but it's subject to change. I don't think it would be any less than that.

Okay, got it. And then on the NEEWS projects, can you remind me what the allowed return on equity is during the construction phase and does that differ from the online phase?

It's 12, 8, 9, David.

It does not differ.

It doesn't differ.

Not different. Okay, got it. And I thought you had about $130 million of projected spend on Merrimack through '13, so we should effectively have that now just through the middle of 2012?

Yes, that's correct.

All right. Thank you, David. Next question's from Jim von Riesemann from UBS. Jim?

I just have a quick question on New Hampshire and legislative strategies up there. Can you just provide a little bit of color with what's going on in legislature next year and how that your strategy might be framed around Northern Pass?

Jim, this is Chuck. It's really difficult to say. I think, as Lee mentioned and as one of the folks asked a little bit earlier, the question around the Eminent Domain Bill was re-referred in the Senate so there will be essentially a reevaluation of that and then a re-discussion of that in the legislature next year. But that's really the only item going on right now around Northern, that was even going on around Northern Pass.

Is there, the follow-up question I have then, is there anything in FERC Order 1000 that you saw that would allow you to avoid some of this legislative issues, possibly?

I don't think so.

All right. Thanks, Jim. And we have no other questions. So thank you, all, very much for joining us today. If you have anything else, please give us a call, and have a great afternoon.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.