Welcome to the Northeast Utilities Q1 earnings call. My name is Yvette, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn your call over to Jeffrey Kotkin. Mr. Kotkin, you may begin.

Thank you very much. Good morning, and thank you for joining us. I'm Jeff Kotkin, NU's Vice President for Investor Relations. Speaking today will be Jim Judge, NU Executive Vice President and Chief Financial Officer; and Lee Olivier, NU Executive Vice President and Chief Operating Officer. Also joining us today are Jim Muntz, President of our Transmission business; Jay Buth, our Controller; Phil Lembo, our Treasurer; and John Moreira, our Director of Corporate Financial Forecasting and Investor Relations. 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 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 news release issued yesterday. If you have not yet seen that news release, it is posted on our website at www.nu.com, and has been filed as an exhibit to our Form 8-K. 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, 2012. 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. Now I will turn over the call to Jim.

Thank you, Jeff and thank you, everyone for joining us this morning. I know that you have a number of calls this week, as companies report their results in advance of the many conferences taking place over the next few weeks. I appreciate that you're spending some time with us this morning. Before I begin, I'd like to thank all of you in the investment community for the many calls and e-mails that we did receive expressing your concern for the safety and well-being of our employees in the wake of the terrible Boston Marathon tragedy on Patriot's Day. It is much appreciated, as all of us in the Boston community attempt to move on from this horrific event, which occurred within the steps of our corporate office in Boston. So thank you, all. My remarks today, I will discuss our first quarter results, recent financing activity, economic conditions in our region and I'll conclude with an update on various regulatory and energy policy issues, including recent storm filings and the FERC ROE proceeding. I'm sure that most of you saw our earnings release issued late yesterday. We earned $228.1 million, $0.72 per share this quarter. While this is ahead of Wall Street's expectation for the quarter, it is very consistent with our $2.40 to $2.60 per share earnings guidance for the year. So we feel comfortable saying that we are on plan. I should remind you that this is the last quarter when we will be comparing pre-merger NU to post-merger NU. So future earnings reports will be more an apples-to-apples basis. Aside from the addition of NSTAR to this year's results, one of the bigger drivers for the quarter was weather. We had record warmth in the first quarter of 2012, pretty typical temperatures in the first quarter…

Thank you, Jim. I will provide you with an update on our major capital projects and our natural gas expansion initiatives and then turn the call back over to Jeff for Q&A. The Greater Springfield Reliability Project, which represents more than half of our expenditures on the news family of projects reached a significant milestone in early March when we energized the new 3.5kV section between Connecticut and Massachusetts. GSRP is now about 95% complete with some additional substation and 115kV line work still to go over the balance of this year. Overall, this project remains on schedule and has been a huge success providing grid operators with a critical new link between Western Massachusetts and Connecticut and helping us to continue to reduce congestion cost or pass-through to customers. We now expect it to be completed as much as 5% below its $718 million budget. We are very pleased with the management of this complicated project and it illustrates our continued decade-long core capability of managing large transmission projects and completing them on or below budget and on or ahead of schedule. Second large piece of news is the 3 state Interstate Reliability Project or IRP. The Connecticut Siting Council approved the Connecticut section of IRP in January. Meanwhile, our partner in IRP, National Grid, has received the unanimous endorsement for the project from Rhode Island utility regulators who have forwarded that endorsement to state siting regulators. Siting hearings have begun in Massachusetts. We still need Rhode Island and Massachusetts siting approvals, as well as environmental permits in Connecticut and Rhode Island and the go ahead from the Army Corps of Engineers. We expect to commence substation construction in late 2013 or early 2014 and line work in mid-2014. Our segment is still expected to cost $218 million. On…

Thank you, Lee. And I will turn the call back to Yvette to just remind you how to enter questions.

[Operator Instructions]

Our first question this morning is from Travis Miller from Morningstar.

I wonder if you could go a little bit more into that 4% core gas growth. You mentioned it here at the end of the call, but was there anything in the quarter unusual? Was there any kind of specific program you guys ran or any kind of major industrial customer who came in? Anything one-off or is that kind of a growth rate that we can expect throughout the year?

Well, when you look at the customers that we're adding over our total cash customer base, we're getting 2% a year basically in customer growth. And what you've seen here in this first quarter is the usage per customer has gone up as well. So I'm not going to commit to say that the underlying gas growth number would be 4% long term, but we certainly anticipated higher growth on the Gas business than on the electric side and that's consistent with the guidance, the long-term guidance that we provided the street.

What do you think is driving that higher customer usage number, apart from the weather? Just the core gas usage is a little different than what we're seeing across the country.

I think the economy is picking up and, as I say, we've seen a number of conversions as well, the combination of those 2 has gas as the preferred fuel of choice.

Next question is from Greg Gordon from ISI.

I wanted to know, it's been an awfully long time since-- that we've been waiting for the finalization of the route on Northern Pass. And I know you guys articulated on the call that the reason for the delay is you just want to firm up local support. But are there any other extant issues whether it's underlying changes in economics or costs or things going on up in Canada or down in Connecticut with regard to sort of political sensitivities to changing economic dynamics. They are also factors here or is this just finalizing all the small details around getting firm support for the route that's causing the delay?

I would say it's really the latter, Greg. This is an important project to the state of New Hampshire, to the New England region, and to the company. I think Lee laid out well the merits of the project in terms of environmental benefits and savings to customers and jobs and property taxes in New Hampshire. We really are just trying to build as much support for the project as we can, addressing any concerns or issues that people have, so it's a matter of increased outreach to the community.

Yes, and I would just add to that, Greg, that if you look at the economics of the project looking at where New England is in terms of the volatility of the energy markets in the winter. When we have--we have certainly a more than adequate supply for the gas companies for the distribution part of the business but there's a severe shortage of pipeline capacity for generation. And what that does is really obviously pushes prices high. That's the kind of a market where HQ can capture that volatility and it actually becomes more profitable for them as a result of this situation, which really has no immediate fix on the horizon. So we think the economics of the project continue to improve.

Okay. Well, there is a significant gas pipeline expansion coming in from the Algonquin in 2015 to 2016. So I think I see your point that this winter and probably next winter are extremely constrained. But I don't think the gas situation in New England in the longer-term is actually that constrained.

It actually is constrained because we have run all the analysis and the pipeline is constrained even with the proposed pipelines coming in, that will certainly solve the issues for the EDCs and solve the issues around supporting our continued growth, but it will not solve the issue for generation and that's also the position of ISO New England as well.

Next question is from Julien Dumoulin-Smith from UBS.

Kind of following up on the last question here. Obviously if the RPS bill moved out of the Senate yesterday, to what extent does a 5% cap on hydro limit the ability for the Northern Pass project to qualify into the RPS as a hydro resource, or transporting hydro resources?

We think the passage of the bill by the Senate yesterday is good news for the state and its electric customers. It furthers the Governor's goals of cheaper, cleaner, more reliable. If I understand it correctly, large Canadian hydro would qualify for renewable status only if the state fails to achieve its goal of 20% renewable by 2020. However, Canadian hydro could still help the state meet its carbon reduction goals, whether that hydro comes from Quebec or the maritime provinces. So even though it's limited to a 5% RFP, it's more than that existed prior to this legislation, legislative proposal. So and I think it's consistent with the governor's goals and that he's welcoming all large-scale hydro. He's not having the government pick winners here. We think the RFP is likely to occur later this year if the legislation is passed.

Just to be clear, the 5% that would allow for a partial contracting of Northern Pass or something if you were to win that RFP?

That's correct.

Excellent. And then kind of going back a little bit. In terms of timeline on the routing, I mean, not to rehash that last question too much here, but at what point do you think you'll be ready to kind of definitively say we have a routing ready to go? I mean, is it another 3 months or another -- by year end kind of at this point?

Julien, right now, just based upon where we are, I would think, by the middle of this year so we're talking around the July time frame we should be ready to announce the route.

And then kind of going back to the oil to gas element here. Just how much of an opportunity is there on the table, particularly given some of the other options pursued at the legislative level to expand or accelerate that conversion rate? I mean, what is the upside here potentially in terms of putting capital to work?

Well, if you think about the expansion plan over a 10-year period, we could add, between the 2 companies, the majority of which would be at Yankee Gas, we could add about 160,000 customers. So you could add about 100,000 customers at Yankee Gas and approximately another 60,000 customers at NSTAR gas. So you're talking about taking the company right now, the total gas company is about 490,000 customers and you're talking about over 600,000, 650,000 customers over a 10-year period.

Next question is from Paul Patterson from Glenrock.

Just back to Northern Pass for a second here. Should we think that basically, I mean there, that there's been some delays in terms of getting this routing thing completely resolved. Would you guys still be, I mean, just generally speaking, you guys are still very confident, though am I right in that, that this is going to actually come to fruition? You were mentioning the economics and everything improving. On a scale of 1 to 10, how should we think about the outlook of this project as to where you saw it a quarter ago?

This is Lee Olivier. I'm not going to opine on your scale. I'm not going to opine on your scale, but I can tell you we're very, very confident that this will be built. I mean, for all the reasons I cited in the call, this project looks better and better. And if you go run out renewables, the portfolios for all of these states, which we have over the course of the next 10 years, it is very, very clear. You can't meet renewables without creating expenses that would just crush the economy of New England. This line from the standpoint of reliability actually because I talked about what happened this winter in terms of reliability. That was very, very close in terms of doing load shed this winter. So if you look at where we are in the region with the shortage of gas, if you look at the renewable portfolio and all of these states also have carbon reduction portfolios, this line will be built. It's different from anything we've done before because we've always had the right of eminent domain. It's been a pure reliability project and this one you don't. So you got a lot of stakeholders and our view of this is to get it right with the stakeholders now and that will save a lot of problems that you would have as you start the actual siting process. So it takes a little bit more time, but this line will be built.

Next question is from Michael Lapides from Goldman Sachs.

I know you can't really opine on the FERC case and honestly I'm not one who would call myself a great predictor of anything that the FERC is likely to do. But when you just think long-term and strategically where you want to allocate capital over a 5 to 10-year period, if there is a significant reduction in the authorized ROE for you and other transmission providers, would that significantly alter your views on, hey, transmission is a good place to allocate capital over long periods of time?

Yes, I think my comments earlier, Michael, commented on that, that to the extent there's a dramatic reduction here I do think it would not only show investment interest at Northeast Utilities, but across the country. And when you have distribution investments that certainly have less risk in terms of siting and development and what have you and the returns in the distribution business are north of 10%, it's hard to imagine that the transmission business much more complex, much more lead time required, more risk, development risks, it should get sort of a premium over what the investment profile is for distribution. So I do think it would have a significant impact on where utilities would opt to invest their capital in the future.

Got it. And one question, unrelated topic, just O&M management and cost reduction post-merger, how do you think you're tracking so far relative to expectations outlined at the Analyst Day in October?

I'd say that we're spot on. I mean, the guidance that we've given the Street is that we think we'll be able to achieve 3% reduction in O&M a year for '13, '14 and '15, that translates to about a $50 million a year reduction in O&M. When you look at what we achieved in the first quarter here, it was close to $25 million. So it would imply that we're ahead of the pace. But the reality is that there was some timing issues. Spending on maintenance that we didn't get to do this quarter that we did a lot of a year ago. So when you adjust for the timing I would say that we're pretty much right on track with where we want to be with that 3% reduction that we're committed to.

Meaning that your reduction year-over-year at this quarter was a little bit bigger, but you could expect maybe less of a reduction in future quarters during '13?

Exactly, Mike.

Next question is from Maurice May from Wellington Shields. Maurice E. May - Wellington Shields & Co., LLC, Research Division: Getting back to the potential for new gas customers I think you said that you have potential for 100,000 at Yankee and 60,000 at NSTAR Gas so that would be 160,000. How can we translate that potential new customer growth into rate base growth? In other words, do you have a rule of thumb of rate base growth for customer addition, anything like that?

Maurice this is Lee. We don't have a rule of thumb for that, but if you just look at Yankee Gas as an example, for new customer connections now, we spent about $27 million a year for new customer connections. And if you think about that over the 10-year horizon, that works its way up to about $80 million to $90 million a year of CapEx. So it's a fairly significant expansion in CapEx. And that's just Yankee. We have started a similar process of educating legislators and policymakers in Massachusetts and should there be a Connecticut-type of legislation, obviously, that growth in NSTAR gas could be higher as well. Maurice E. May - Wellington Shields & Co., LLC, Research Division: Okay. So at Yankee, for example, you're spending $27 million this year for the addition of how many customers?

We'll do about 4,600 customers at Yankee this year.

Next question is from Jonathan Reeder from Wells Fargo.

On your Analyst Day slides you had mentioned about the additional CapEx upside over the next several years from potential transmission projects, are there any specific items such as, like, power plant shutdowns that we're waiting to see how they play out or is this just more continuing to evaluate the recently combined system and make proposals into the ISO, when do you think you might have a better idea on these potential opportunities?

Jonathan, this is Lee Olivier. I think from the standpoint of our forecast that we provided on the last call, which is essentially the $3.9 billion. We actually know where all of that $3.9 billion will go. We know every project. Where it is, many of these, the majority of them have approvals through the ISO New England regional system plan. So we literally know where every bit of that $3.9 billion is going right now. To the extent that there is additional plant shutdowns, power plant shutdowns, that could create some additional opportunity.

But at this juncture I guess you haven't identified anything yet outside of that original $3.9 billion in the region?

No, no, nothing at all. Well, obviously, our model has continued to look at the system. We continue to find areas that need transmission fixes and as we do, we'll update you in the fall.

Our next question is from Andrew Weisel from Macquarie.

I saw the comment in the press release that weather adjusted and leap day adjusted electric sales were up 1%, can you give a little more detail on the split between states and between customer classes?

I don't have that detail, Andrew, in front of me. What I would say is that we've seen more robust growth on the residential sector on both the electric and gas side than commercial. I don't have the numbers to quote by state or even combined, but a pretty good quarter 1% growth on the electric side and 4% base growth on the gas side.

And then one just quick one on Northern Pass. I mean, certainly appreciate that it's a small, but vocal minority that are very opposed to it in New Hampshire and it sounds like you guys are really going as far out of your way as you can to try to accommodate that group. Is there a certain point at which you just say, agree to disagree, we're going to move forward? It's been a moving target and now you're saying July, is there a certain goal you're trying to reach in terms of these customer outreach programs or where do you just say, we can't make everybody happy it's for the greater good?

This is Lee Olivier, Andrew. I guess we'll say we're not there yet. We're not at a point where we're going to plow through this thing because we really do think it's appropriate. PSNH had a long history of success working with the communities and regulators. They are very, very good at this and right now, we are committed to work constructively with both of the state and the local communities and other key stakeholders. So I would say at this point in time, it's premature to say that we would plow on. We think we're very, very close on this and our partner in this, Hydro-Québec, has a long history as well of working very well in the communities and they're every bit as concerned as we are about making sure that the outcome here is right in the state and in the communities. And then as you said, you're never going to get everyone to concur with you, to agree with you. There'll always be some that will oppose, but once we feel we have brought enough consensus, we'll move forward.

Can you elaborate on what some of the sticking points are? I mean, is it where do the lines go? Is it buried versus above ground or is it height of the towers?

It's all of the above. It's literally all of the above. It's all of those issues. For instance, there's land in which we have purchased, we own or we have bought easements on and some of those areas they're fairly scenic and so where do you lay the line out? Do you lay it out in front of the tree line off a ridge? Or do you lay it out around the back that costs you some more money to go around the back of the hill. But those are all the kinds of conversations we're having. As we've said, most of these transmission towers that are about 135 feet. We've found ways to get most of the transmission towers down to 85 feet and that's after a long, long consultation with the National Forest Service. So it's that type of interaction with key stakeholders that takes the time.

Well, we don't have any more questions currently, so we want to thank you for joining us today. If you have any questions later in the day, you can give either John or me a call. Have a great day. Good luck on the other earnings calls.

Thank you.