Our Responsibility

Sustainability at The United Illuminating Company

2010 Report

Table of Contents
Why We Care: A Letter From Executive Leadership ............................................................................ 2 Executive Summary: Sustainability at UI ................................................................................................. 3 Our Economic Responsibility: Our Business ........................................................................................... 4

About UIL and UI ............................................................................................................................................................................................ 4 UI Mission .............................................................................................................................................................................................................. 4 UI Vision ................................................................................................................................................................................................................. 4 Financial Performance: Investing in a Green Future.................................................................................................................. 5 Stakeholder Value............................................................................................................................................................................................. 5 Energy Security and Reliability: Keeping the Lights On .......................................................................................................... 6 A New Generation: GenConn Energy LLC .................................................................................................................................. 6 The Plan Ahead and Infrastructure Investments ........................................................................................................................ 7 Sales and New Ventures: Sustainability Is Good Business .................................................................................................... 7 Strategic Account Services ......................................................................................................................................................................... 8 Public Policy .......................................................................................................................................................................................................... 9 Investment in Renewables ........................................................................................................................................................................ 9 UIs Central Facility ........................................................................................................................................................................................10 e Sustainability in Action: Central Facility project scores LEED points with recycled materials ............................10
Our Environmental Responsibility: The Natural Resources We Depend On ..............................11

Climate Change ............................................................................................................................................................................................... 11 Environmental Policies and Compliance .........................................................................................................................................12 Material Use and Waste Management ............................................................................................................................................12 e Sustainability in Action: Cuts in paper use lead to big reductions in waste ...................................................................12 A Focus on Energy Efficiency .................................................................................................................................................................13 e Sustainability in Action: Old-fashioned eats, modern lights .......................................................................................................14 Land and Habitat Management ............................................................................................................................................................15 Water Usage......................................................................................................................................................................................................15 Fleet Management .........................................................................................................................................................................................15
Our Social Responsibility: Employees and Community..................................................................... 16

Workforce Development and Training ...........................................................................................................................................16 Safety.......................................................................................................................................................................................................................16 Diversity................................................................................................................................................................................................................17 Employee Health and Wellness ............................................................................................................................................................17 Economic Development ............................................................................................................................................................................17 UI in the Community...................................................................................................................................................................................18 e Sustainability in Action: Nonprofits reap funds from UI recyclables...............................................................................18 Assistance Programs ....................................................................................................................................................................................19 Emergency Preparedness and Business Continuity Planning ............................................................................................20
Looking Ahead................................................................................................................................................ 20

Why We Care: A Message from Executive Leadership

A healthy bottom line is essential for any corporation. But its not enough. For a corporation to thrive, it must also be able to show it has a healthy relationship with the environments on which it will depend for a prosperous future. The natural world. The society Chief Executive Officer President and Chief in which we live and work. The Operating Officer financial community. The decisions we make now will affect our ability to access these resources in the future. We call this concept sustainability. Recognizing this, The United Illuminating Companys leadership in 2008 assembled a cross-functional team to find ways to integrate sustainability principles into all UI business practices. That team is now known at UI as the Business Enterprise Sustainability Team, or B.E.S.T. UI has long been a leader in helping customers conserve energy and use it more efficiently. Now, were going a step further. Weve begun analyzing our operations through the three lenses of sustainability: economic, environmental and social. Weve begun quantifying our greenhouse gas emissions so we can track our contribution to climate change and set goals around it. Weve engaged our diversity team to ensure that our company, our employees and our values are aligned with the diverse communities we serve. Weve taken steps to galvanize our customers and employees around our sustainability goals. And, with our corporations recent acquisition of three New England natural gas utilities, we are actively seeking ways to share these values across all of our operating companies. We recognize that the pursuit of sustainability is a journey, and we know we are at the early stages of this journey. We have much to learn as we progress. We must continue to integrate these efforts into our business practices, policies, procedures and metrics. We do so in the belief that the business decisions we make today will enhance our bottom line for many years hence. In the long run, doing the right thing makes good business sense.
James P. Torgerson Anthony J. Vallillo

Executive Summary: Sustainability at UI

Our business activities affect the environment and the communities in which we live and operate. Stakeholders expect us to deliver energy in the most efficient way possible and to help society make the transition to cleaner, renewable energy sources. Its not enough for us to comply with environmental regulations: We must operate in ways that stretch beyond measures of compliance in order to truly be successful. Sustainability at UI means that we are committed to business practices that are environmentally, socially and economically responsible, with a goal of increasing the companys value to all stakeholders. Sustainability is not new to UI, although we did not adopt this term until recently. For many years, we have pursued excellence with a focus on better understanding and managing our economic, environmental and social impacts on our communities concerns that are enshrined in our Mission and Vision. The difference today, however, is that we are focused on integrating sustainability throughout our business in a systematic way. Our Economic Responsibility is grounded in the understanding that the decisions we make ultimately need to make good business sense and show a positive financial return (see Financial Performance). All decisions pass through this filter, including: E Our recent gas company acquisitions in November 2010. E The construction and operation of the GenConn Energy LLC peaking generation facility (see A New Generation: GenConn Energy LLC) E Investments related to our Plan Ahead (see The Plan Ahead and Infrastructure Investments). E UIs new Central Facility (see UIs Central Facility). For every decision, we must consider the full lifecycle cost-and-benefit impacts, not just immediate costs. We know, however, that by also considering the environmental and social impacts of our decisions, in the long term we will see the benefits in our bottom line. Environmental Responsibility means operating in a way that aims to reduce our impact on the environment. Are we consuming resources faster than they can be restored, and do our business decisions reflect this concern? Our environmental responsibility is reflected in business practices such as: E Our robust environmental policies (see Environmental Policies and Compliance) and systems. E Waste and pollution reduction efforts (see Material Use and Waste Management). E Our award-winning energy efficiency programs for customers (see A Focus on Energy Efficiency). We also recognize the importance of educating customers and providing solutions and programs to help them reduce their own environmental impacts.

At UI, Social Responsibility has two components: an internal component related to our employees and the workforce and an external component related to our involvement in the community. Internally, our programs and policies consist of: E Proactively recruiting, developing, training and supporting a highly qualified, diverse workforce (see Workforce Development and Training). E Exceptional safety training, programs and practices (see Safety). E Our commitment to fair labor practices, reasonable compensation and active diversity efforts (see Diversity). Externally, we strive to become a positive force in our community. We support multiple local charities, and our employees contribute individually through our company match campaign (see UI in the Community). We also demonstrate this commitment through our SmartLiving Center and eesmarts educational programs and our partnerships with regional nonprofit organizations. Ultimately, our responsibility maintaining a sustainable business means realizing the intersection of these three pillars of sustainability in order to provide value in the long term, rather than focusing on short-term financial gain.

Our Economic Responsibility: Our Business

ABOUT UIL AND UI The United Illuminating Company is an electric distribution company based in New Haven, Connecticut. Founded in 1899, we serve more than 324,000 customers in 17 communities in and around New Haven and Bridgeport, Connecticut. We employ more than 1,100 dedicated individuals in a wide range of trades and professions. Our parent company, UIL Holdings Corporation, trades on the New York Stock Exchange under the ticker symbol UIL. In November 2010, UIL Holdings completed a transaction to acquire three natural gas distribution companies from Iberdrola, USA. The three companies Berkshire Gas Company, Connecticut Natural Gas Corporation and The Southern Connecticut Gas Company now join UI as part of a larger, more diversified energy company serving a total of 690,000 customers in 66 communities across two states. At the time of this publication, all of the UIL companies were working together to integrate their operations, with a goal of operating more efficiently and sharing best practices in many areas, including sustainability. This report focuses on the activities of the electric utility, The United Illuminating Company, during the 2010 calendar year. UI MISSION UI is a premier provider of electric utility services to our customers and value to our shareowners. UI VISION We are recognized by our stakeholders as a utility industry leader, focused on the customer and engaged in deploying environmentally sustainable solutions that provide electric utility services safely, reliably and at a reasonable cost. We serve our customers and shareowners by utilizing best practices, highly engaged employees and prudent investments in regulated transmission, distribution, generation and other closely related utility services.

FINANCIAL PERFORMANCE: INVESTING IN A GREEN FUTURE Whatever the future brings, its clear our stakeholders will hold us to ever-higher standards for clean energy and efficiency. Our ability to maintain and upgrade our electric system to make this possible rests largely on our ability to attract investors. At UIL, we realize the benefits of sustainability initiatives. Adopting initiatives to enhance financial performance is a work in progress. In recent years, we consciously made the decision to reduce paper waste by eliminating printed annual reports and certain other shareowner documents. STAKEHOLDER VALUE UIL demonstrates a conservative financial strategy and is committed to maintaining strong financial performance, a healthy balance sheet and an investment-grade credit rating. UIL has paid a consecutive quarterly dividend, without suspension, for more than 100 years and continues to provide investors with an attractive $170 dividend yield on their investment. $150 Quarterly cash dividends declared $130 in 2010 were at a rate of $0.432 $110 per share. UIL Holdings expects to $90 continue its policy of paying regular $70 cash dividends, although there is no $50 assurance as to the amount of future DEC DEC DEC DEC DEC DEC 2005 2006 2007 2008 2009 2010 dividends, which depend on future UIL S&P 500 S&P Public Utility Index S&P Elec. Pwr. Co. Index earnings, capital requirements and financial conditions. The accompanying line graph* compares the yearly change in UIL Holdings cumulative total shareholder return on its common stock with the cumulative total return on the S&P Composite-500 Stock Index, the S&P Public Utility Index and the S&P Electric Power Companies Index for a period of five fiscal years, commencing in 2006 and ending in 2010.
*Assumes that the value of the investment in UIL Holdings common stock and each index was $100 on December 31, 2005 and that all dividends were reinvested. For purposes of this graph, the yearly change in cumulative shareowner return is measured by dividing (i) the sum of (A) the cumulative amount of dividends for the year, assuming dividend reinvestment, and (B) the difference in the fair market value at the end and the beginning of the year by (ii) the fair market value at the beginning of the year. The changes displayed are not necessarily indicative of future returns measured by this or any other method.

ENERGY SECURITY AND RELIABILITY: KEEPING THE LIGHTS ON Providing electricity to our customers that is reliable, safe and affordable is one of our primary goals. However, operating as a regulated business, we must consider several externalities when procuring, transmitting and distributing electricity and now producing it at our jointly owned GenConn plants (see below). UI is committed to investing in infrastructure that will benefit our customers and our business by holding costs down, providing state-of-the-art technological solutions, reducing grid congestion and managing peak demand. These investments enable us to continue to be a trustworthy neighbor while keeping our customers lights on. A NEW GENERATION: GENCONN ENERGY, INC. In 2008, UI entered a unique partnership to build two generation plants capable of providing a boost of additional supply during times of peak demand. The joint venture, GenConn Energy LLC, was proposed in response to the Connecticut legislatures call for solutions to address the states shortage of peaking power supply. The first plant, in Milford, became operational in the summer of 2010. A second plant in Middletown is scheduled to go online in June 2011. The plants were constructed on a cost-of-service basis, meaning that instead of charging the highest price the market will bear for the electricity they generate, GenConn will only charge enough to recoup the initial investment, plus an allowed rate of return set in advance by state regulators. The 200-megawatt plants are capable of firing up quickly during peak-demand periods such as hot summer afternoons, reducing the need for voltage-reduction measures and potentially offsetting reliance on higher-emission fuel sources. The units have features that will significantly reduce their environmental impact. They can run on clean-burning natural gas and ultra-lowsulfur (ULS) fuel. This feature, along with the units selective catalytic reduction (SCR) and water injection systems, will collectively reduce the emissions of sulfur dioxide by 97 percent below current allowable levels, nitrogen oxide by 90 percent compared to uncontrolled emissions, and carbon monoxide and volatile organic compounds as well. From a water usage standpoint, the sites hold permits to divert water from the Housatonic and Connecticut rivers for cooling, which, at certain high ambient temperatures, significantly improves the combustion turbines efficiency and electrical output. Overall, operating UIs new peaking generation units will reduce the states reliance on less efficient oil-fired steam boilers, thereby providing significant environmental benefits.

THE PLAN AHEAD AND INFRASTRUCTURE INVESTMENTS Creating the greener, smarter, more capable electric grid of the future means continuously investing in our system. Whether were replacing old poles or building high-tech substations, we not only consider our needs now, but also what well need 10 years into the future. We call this approach The Plan Ahead. The Plan Ahead is UIs ambitious and far-ranging effort to ensure that the electric system we have built and continue to maintain is able to meet future customer demands while remaining as safe and reliable as it is today. Realizing the importance of smart infrastructure investments, in July 2010 UI entered into an agreement to invest in and own transmission assets associated with the Connecticut portion of the New England East West Solution (NEEWS) projects. NEEWS consists of four related projects that will improve the transmission systems ability to meet national and regional reliability standards, ensure the adequacy and availability of electric power, and provide access to cleaner, competitively priced electric power. In addition, UI is actively pursuing region-wide growth opportunities, partnering with other entities to identify potential new transmission projects. These consist primarily of projects that will interconnect renewable generation resources to satisfy UIs renewable portfolio requirements and potentially lead to further investment opportunities for UI. For the Distribution Transformer Replacement Program, UI conducted a complete sweep of its distribution system to identify overhead line and pad-mounted transformers that may contain PCBs in the insulating fluid. Plans were put in place to replace those that were found to be in poor condition or potentially overloaded. The replacement transformers will meet new, more stringent U.S. Department of Energy transformer efficiency standards, requiring less energy and creating fewer emissions. SALES AND NEW VENTURES: SUSTAINABILITY IS GOOD BUSINESS Sustainability, conservation and our customers economic well-being are always top concerns as we develop new products, programs and services. These programs provide customers with new opportunities to utilize energy more efficiently, reduce greenhouse gases and improve their bottom line. Current programs and those under development include:

E helo: helo is UIs home area network pilot program to leverage our advanced grid and state-of-the-art helometers to provide customers with unprecedented insight and control over their energy consumption. Armed with information, we believe helo customers will make smarter choices about how and when they use electricity, thereby reducing their energy bills and the impact on the environment. E Electric Vehicles Infrastructure: UI has been working at the state and local level to help streamline the integration of electric vehicles into Connecticut in hopes of reducing our dependence on foreign oil and greenhouse gas emissions. UI is piloting various charging-station technologies, helostations, and assessing the potential effects of electric vehicles on our distribution infrastructure. E Lighting Technology: UI is testing the viability of LED streetlights, which can cut energy consumption by approximately 50 percent compared with traditional highpressure sodium streetlights. E TempAssured: This residential water heater leasing program heats water at night when electricity is less expensive and more abundant, reducing the use of less-efficient power generation used during peak daytime hours. This program is most effective for time-ofday rate customers. E Demand Response: Commercial and industrial customers that participate in UIs Load Response Program agree to reduce their electricity consumption during times of peak usage in exchange for bill credits, thereby enhancing system reliability and helping to defer the construction of new peaking generation units. This helps alleviate the strain on the power grid, improves reliability and potentially reduces the need for high-emissions oil and coal generation. STRATEGIC ACCOUNT SERVICES Strategic Account Services (SAS) manages UIs largest clients by providing core electric and customer service-related activities. SAS ensures the retention of profitable UI revenues by leading activities that leverage client relationships for mutually beneficial opportunities. By developing positive relationships, SAS enhances UIs position as a premier provider of energy and energy-related products and services. We take environmental sustainability into consideration on a daily basis by promoting sustainability to our customers, providing training that will promote electric savings and help customers meet their sustainability goals, and assisting customers with system and process improvements that will increase their efficiency and quality of products and service. In addition, this department embraces sustainability by providing an electronic newsletter to strategic accounts that promotes energy conservation, and by maintaining collective bills in an electronic format (page 12), reducing the amount of paper and ink consumed by our company.

PUBLIC POLICY UI is actively involved in the public policy discussion around energy and sustainability, and recognizes the many challenges and opportunities that face both the company and the electric industry relative to sustainability. UI must balance multiple priorities in order to optimally serve stakeholders including ratepayers, shareowners and regulators. UI engages numerous federal, state and regional agencies and government bodies that help shape the legislative and regulatory landscape. Through efforts before the Connecticut General Assembly and within policy/planning dockets such as the Integrated Resource Plan, as well as proceedings before the Connecticut Siting Council, the company provides direct input on public policy. UI was active during the 2010 legislative session, participating in the debate on such initiatives as S.B. 493, An Act Reducing Electricity Costs and Promoting Renewable Energy. INVESTMENT IN RENEWABLES UI continues to investigate opportunities to develop renewable energy as part of our regulated business. One approach is for UI to offer customers a portfolio of technology solutions, including renewable energy options. This potential service offering, which is still under development, will be known as UI Renewable Connections. This effort leverages the companys significant technical capability, market access and ability to finance projects in ways that can provide benefits to ratepayers, generate economic growth and promote the development of green jobs in Connecticut. We believe UI can be part of the solution to implement Connecticuts mandate for more renewable sources of energy. Potential offerings that leverage UIs capabilities include: E Development of demand- and grid-side renewable projects, which can include solar photovoltaics, fuel cells and combined heat and power systems. E A lease program for smaller-scale solar appliances and micro-combined heat power systems for residential and small commercial and industrial customers. E Packaging conservation programs with renewable technology applications. E Expanding UIs existing water heater rental program to include solar thermal technologies. We continue to work with legislators to define ways to leverage utility capabilities and advance the application of renewable technologies in Connecticut. This effort will support mandates for increased production of energy from renewable sources and promote energy independence.

UIS CENTRAL FACILITY UI is building a new centralized corporate headquarters and operations center in Orange, Connecticut, and plans to relocate there in 2012. From the outset, our philosophy of sustainability has been incorporated into this project. The architect has designed the buildings to meet and possibly exceed Leadership in Energy and Environmental Design (LEED) Silver certification, a hallmark for sustainable design. This project has the potential to demonstrate UIs leadership in energy efficiency and environmental stewardship. Here are a few examples of some of the sustainable features we are incorporating: E Existing on-site materials have being processed, reused and recycled as fill for the new facilities (see below). E The buildings have been designed to take advantage of ambient light whenever possible, reducing the need for daytime electric lighting. E The buildings will employ a floor-based heating and cooling system, which is more efficient than blown air from ceiling ducts. Our goal is to show how effective decision-making can lead to lower lifecycle costs to ratepayers and create value to all stakeholders.
SUSTAINABILITY IN ACTION

Central Facility project scores LEED points with recycled materials Asphalt, stone, rock, concrete, soil this is just about all that remains of the former Showcase Cinemas, which once stood at the site where UI is building its new operations facility. In a sense, the cinemas will live on at the site on Marsh Hill Road and at a nearby parcel where UI is building its future administrative headquarters. Approximately 60,000 cubic yards of materials left over from the demolition of the cinemas are being processed and reused as structural fill for the Central Facility project. Thats the equivalent of about 3,500 truckloads of material! These reuse efforts reduce the need for materials to be brought into or hauled away from the site, in turn reducing vehicle emissions. They also help avoid the need for heavy truck traffic in the area, a key concern of neighbors. In addition, by reusing these materials, the buildings earn valuable points toward being LEEDcertified by the Green Building Certification Institute, a third-party organization that sets standards for sustainable construction. Recycling the site materials is an authentic example of UI taking action on its commitment to sustainability, said Marissa Westbrook, a member of UIs Business Enterprise Sustainability Team (B.E.S.T.). The Central Facility project is not only visible to our employees, but also to our customers and stakeholders, so we have a vested interest in doing the right thing, environmentally, socially and financially.

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Our Environmental Responsibility: The Natural Resources We Depend On

CLIMATE CHANGE Heightened public concern about climate change has led UI to seek new ways to reduce its contribution to carbon emissions those produced by our company as well as by our customers. In 2008, UIs Business Enterprise Sustainability Team (B.E.S.T.) spearheaded an effort to begin annually quantifying our companys greenhouse gas emissions (carbon inventory). This carbon inventory focuses on direct emissions from fuel use, indirect emissions from electricity use (including transmission and distribution line losses) and selected indirect, supply chain-related emissions. As a result we have been able to identify several areas we can target for improvement, including line losses from our transmission and distribution operations and the operation of our vehicle fleet, two of our largest sources of emissions. We have since been striving to implement initiatives to address and reduce these impacts. Our goal is to reduce greenhouse gas emissions over time from a variety of operational activities within our organization. In fact, data trends show that year over year we have been steadily reducing emissions associated with losses from our transmission and distribution system. There is growing evidence that adoption of this climate-focused sustainability strategy will help our organization achieve our social, environmental and financial goals, the result of which can help achieve longterm and sustainable business success. A breakdown of our most recent carbon inventory can be seen in the accompanying charts.

2009 Total Carbon Emissions in Metric Tons CO2-e=95,903.28

T&D Losses 87.1%

Allocation of Carbon Emissions to Operating Unit (excluding T&D losses)

TRB Transmission Business UIE 1% UI Executive 1% CFF Client Fulfillment 24%

SBS Strategic Business Services 3% INT Information Technology 6% HRS Human Resources 2% Everything Else 12.9% FIN Finance 4% ELS Electric System 53%

COR Corporate Affairs 0% CSV Client Services 6%

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ENVIRONMENTAL POLICIES AND COMPLIANCE When the environmental movement was still in its infancy, UI was already looking for ways to provide electricity safely, reliably and economically while protecting our environment. This commitment is evident in our environmental policies and business practices, which include our diligent attention to compliance. We ensure that our facilities are designed, constructed and operated in an environmentally responsible manner, and we continually strive to maintain compliance with all prevailing environmental laws and regulations. Over the last several years, UI has also achieved significant reductions in the generation of hazardous wastes by updating our operating procedures and reviewing the products we use. We have stepped out ahead of the industry in establishing a process for eradicating polychlorinated biphenyls (PCBs) from our equipment, even though the use of such equipment is still allowed under the law. UI will continue to participate as a leader and concerned corporate citizen in environmental matters at the local, state and federal level, and we will remain committed to operating our business in a manner consistent with sustainable environmental practices and good business judgment. MATERIAL USE AND WASTE MANAGEMENT UI has made significant strides in the management of both materials and solid wastes over the last several years. We use soy-based inks and recycled paper for a significant portion of our marketing materials. Bills and bill inserts are printed with recycled-content paper and, as of the end of 2010, approximately 48,000 customers had been enrolled in our paperless billing program. In addition, in recent infrastructure upgrades UI has become a leader in our use of low loss transformers, which on average are more efficient than those used nationally and use less energy to operate. From a solid waste management perspective, our primary approach is to reduce waste generation where possible first, and then reuse or recycle material where possible. Some examples include paper reduction efforts that have sharply reduced the amount of billing paper used over the last two years, expanded programs for recycling redeemable bottles and cans (page 18), and the reuse of excavated stone, rock and other materials for the construction of our new Central Facility (page 10).
SUSTAINABILITY IN ACTION:

Cuts in paper use lead to big reductions in waste Approximately five years ago, UIs Billing Department recognized a great opportunity to improve efficiency while reducing waste. The companys collective billing process was awash in paper, consuming 15,000 sheets of paper a month, or 180,000 a year. The department knew it could do better. So it met with UIs Information Technology team and others in the company to explore alternatives. Each bill was being printed in duplicate: one copy for the customer and one copy for the UI file. Moreover, the printing method employed in the process was one-sided, leaving each piece of paper blank on one side. The first change to address this excessive use of paper was to print on both sides of the bill. This was accomplished in 2006, and it immediately reduced the amount of paper required for the process by up to 50 percent. This helped hold down postage costs as well.

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The team wanted to do more. So the next change was to eliminate printing of the file copies. Collaborating with employees across the company, the team created a process to replace paper records with electronic files, stored on the network rather than in bulky cabinets. This initiative went live in April 2010. Now, a two-page bill that once would have consumed four sheets of paper one for each page of the bill, plus the duplicate has been reduced to a single page. These measures helped to lessen the amount of paper consumed in the process by up to 75 percent, saving up to 135,000 sheets of paper each year! It also helped to improve operational efficiency, reduce postage costs and free up storage space collateral benefits that often spring from sustainability initiatives. A FOCUS ON ENERGY EFFICIENCY Promoting energy efficiency not only helps us to lighten our environmental footprint, but also provides an array of benefits to the customers and communities we serve. UI has provided energy efficiency programs to customers since 1988, and beginning in 1998 UI, along with CL&P, has administered energy efficiency programs offered through Connecticuts Energy Efficiency Fund. Connecticuts award-winning energy efficiency programs recently rated as high as No. 3 and currently No. 8 nationally by the Association for an Energy Efficient Economy (ACEEE) help to create jobs, lower energy bills, lessen dependence on foreign fuels, reduce energy consumption and decrease harmful emissions from power plants. Programs are available for all types of customers, providing technical assistance and financial incentives for electric and gas energy efficiency projects related to new construction, major renovation, retrofits, new equipment, and operations and maintenance. In 2010 the programs UI administered yielded the following energy savings and associated benefits: Residential 179,162 52,957,147 304,746,022 514,022 8,636,811 316,352 5,318,193 26,281 Commercial 744 36,677,611 488,979,655 279,635 3,714,289 0 0 16,160

Customers Served Energy Savings Kilowatt-hours Annual Kilowatt-hours Lifetime Natural gas per 100 cubic feet (annual) Natural gas per 100 cubic feet (lifetime) Gal. Oil Annual Gal. Oil Lifetime CO2 Emissions Reduced Annual (Metric Tons)*

*Source: The Climate Registry General Reporting Protocol with updated emissions factor tables, released Jan. 2010

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SUSTAINABILITY IN ACTION:

Old-fashioned eats, modern lights Chicks Drive In of West Haven, Connecticut, is known throughout the region for its hot dogs, lobster rolls and ability to evoke a bygone era. Unfortunately, from an energy perspective, those simpler times were also less efficient times. Obsolete lighting and other equipment were adding costly kilowatt-hours to the small, family-owned businesss monthly electric bills. In early 2010, the business owners learned of the Energy Efficiency Funds Small Business Energy Advantage (SBEA) program. SBEA is designed to provide costeffective energy-saving services for small commercial and industrial customers who do not have the financial resources or in-house expertise to analyze and reduce their energy usage.
West Haven Mayor Picard, left; Chick Celentano; Richard W. Steeves, Chairperson, Energy Efficiency Board; and Pat McDonnell, UI Senior Director, Conservation and Load Management.

An approved UI vendor performed a complete energy assessment of the property and developed a strategy to lower its energy consumption. Obsolete T12 fluorescent interior lighting was replaced with high-efficiency T8 lighting, and occupancy sensors were installed in work areas where there is generally little activity. The high-intensity exterior lights were replaced with more efficient pulse-start technology, and motors and evaporator fan controls were also upgraded. The upgrades are expected to reduce the annual electricity consumption at Chicks by approximately 48,639 kilowatt-hours a year a savings of roughly $9,000 annually. Its expected it will take about two years for the savings to repay the total $32,000 cost of the project, of which approximately $15,000 was subsidized by the Energy Efficiency Fund and the balance through financing. The improvements are also projected to reduce overall peak demand by 6.67 kilowatts, helping to alleviate the need for fossil fuel-burning generation during times of peak electricity consumption, which tends to correspond with poor air quality. Achieving energy efficiency is good for businesses, good for the regions economy and good for the environment a triple win by any standard!

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LAND AND HABITAT MANAGEMENT UI is challenged with maintaining a delicate balance: We must acquire land to sustain a safe and reliable electric system, while protecting the natural habitat to the extent possible and reducing the impact upon the environment. In addition, we must clear and manage vegetation to accommodate our transmission and distribution lines and other equipment. However, consideration is given to preserving Connecticuts urban forest, privately owned trees, general tree health and the scenic nature of our roadways. UIs line clearance program only removes trees and vegetation when they are deemed a hazard to the public or utility workers, if there is potential interference with the safe operation of UIs equipment, or to allow for installation of new equipment needed to serve customers. Biomass resulting from line clearance is recycled; most of it is reprocessed and turned into mulch. WATER USAGE Access to clean and safe water is an issue of growing importance throughout the world. We monitor water usage and are committed to managing our consumption with care and appreciation for other potential users of this resource. At UIs current headquarters in New Haven, we use bathroom faucets with low-flow aerators that turn off automatically after use; we also use auto-flush toilets that consume just one gallon of water per flush. We will employ similar systems in the future Central Facility under construction in Orange, Connecticut (page 10). At that facility we will also reduce irrigation requirements by using native plantings near the road and by not using fertilizers. FLEET MANAGEMENT UI recognizes that the operation of our fleet of light- and heavy-duty vehicles including their maintenance is a significant contributor to our carbon inventory. During 2009 and 2010 we developed a Fleet Management Strategic Plan to identify opportunities to use our vehicles more effectively, reduce costs and lessen environmental impact. Components of this plan include: Vehicle maintenance: Whenever possible, we have been extending maintenance periods for company vehicles, potentially reducing consumption and costs related to materials and parts. As part of this program, UI Fleet Management has also been actively recycling tires and motor oil.

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Vehicle replacement: Our vehicle replacement policy calls for eliminating older, less efficient equipment and replacing it with new vehicles using cleaner technologies. In doing so, we must ensure that those vehicle types meet our operational demands. We currently have 13 vehicles that operate on flex fuel and two gas-electric hybrid vehicles. Other initiatives: We are continuously looking at how we collect data so that we can better track and measure fuel consumption. Were also looking at new ways to schedule and assign work crews to reduce the number of miles they drive. In addition, employees who drive as part of their job will have additional communication and training with information about safe and efficient driving practices, vehicle idling, vehicle inspections and more.

Our Social Responsibility: Employees and Community

WORKFORCE DEVELOPMENT AND TRAINING UIs employees are its greatest asset. To continue their growth and support their commitment to our customers, UI provides a wide range of training programs and development resources that are focused on both professional development and jobspecific technical training. The company offers a Leadership Development Program to foster employees development as leaders at work and in the community. In addition, UI offers a tuition reimbursement program that is open to all employees and which reimburses a significant portion of class costs. The tuition reimbursement program has enabled many employees to achieve the dream of receiving a college diploma and to better position themselves to advance their careers. Developing our talent from the ground up, we are involved with local secondary schools, post-secondary technical schools and colleges. During 2010 we provided students throughout Connecticut with opportunities to participate in comprehensive job shadowing, instruction and paid internships. SAFETY Safety is UIs top priority. Our target is zero workplace accidents and injuries. We follow this with an equal commitment to public safety. We meet this commitment through continuous employee safety training, the highest standards in safe work procedures and practices, the use of personal protective equipment, high-quality tools and materials, and regular public-awareness programs. UI constructs and operates its facilities, job sites and equipment in accordance with comprehensive safety practices that are consistent with OSHA, federal regulations, current technology and sound safety business practices. The focus on safety begins at hiring, when each employee undergoes a safety orientation and receives a copy of the UI Safety Manual, which outlines safety rules for field and office workers. UIs Safety Department ensures that all safety-related training is completed and that employees know the safety equipment that is available. In addition to the Safety Department, UI has a number of cross-functional, joint union and management safety teams, such as the Central Safety Steering Committee, which identify and address safety concerns across the company.
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On larger projects, UI has partnered with OSHA and outside contractors to create a collaborative safety effort, which has been successful in reducing job-site injuries. The company also provides resources to first responders and the public to educate them in regard to safety concerns when dealing with power lines and electrical equipment. DIVERSITY Our success and competitiveness depend on our ability to harness the diversity our employees bring to the company. Creating a culture of respect, recognizing differences and embracing the diversity within our workforce allow our employees to perform to their highest potential and deliver the quality of service that our customers expect. To ensure that the entire company shares this commitment, UIs Diversity Advisory Team organizes annual company-wide training events focusing on various aspects of diversity, ranging from generational differences to inclusive communications. Members of this team are embedded within UI business units across the company and are charged with galvanizing employees around a culture of respect and inclusion. As a company and as individual employees, we partner with a variety of community organizations to ensure that we continue to promote a workplace reflective of our community. These include the American Association of Blacks in Energy, Connecticut Alliance for Business Opportunity, Connecticut Pre Engineering Program, Empower New Haven, Greater New Haven Business and Professional Organization, Inroads Fairfield/Westchester County, Junta, and the Latino & Puerto Rican Affairs Commission. EMPLOYEE HEALTH AND WELLNESS We offer a variety of programs and informational resources to promote the health and wellness of our employees and their spouses or domestic partners. These initiatives not only keep employees healthy but also help to control our healthcare costs. Our cross-functional Health and Wellness Team provides programs that encourage wellness among employees. Two of the successful programs implemented by the team are Fitness Forward and Weight for Me, in which employees form teams and challenge each other to meet wellness goals. These programs promote exercise and weight loss and have proven to be successful in encouraging employees to be more health conscious. ECONOMIC DEVELOPMENT UI is a state leader in economic development, and we are proud to support our communities. UI assists local economic developers by providing funding for their organizations and giving them the tools to succeed. Our services to communities include site selection, business retention and expansion, visitations, regional marketing and economic development training. In 2010, UI organized Connecticuts Central Coast Familiarization Tour, bringing 12 corporate real estate professionals and site selectors from across the country to the region to learn about the advantages of locating businesses here. UIs support of regional marketing efforts includes our award-winning Connecticuts Central Coast website, v, which features demographic information and available sites and buildings in our 17 towns and cities.
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UI and its leadership support a variety of organizations dedicated to growth in the state and region, including REX Development, the Connecticut Economic Resource Center, the Connecticut Economic Development Association, Connecticut Main Street Center and the Connecticut Regional Institute for the 21st Century. UI IN THE COMMUNITY Being a good corporate citizen is integral to UIs business. UI and its employees expressed their commitment to the community with more than $2.5 million in tax credits and direct contributions in 2010. The accompanying chart shows a breakdown of our 2010 charitable giving. In the wake of the Haiti earthquake disaster on January 12, 2010, the company and its employees rallied together and collected a total of $12,707, which included a company match. In June, when a tornado devastated sections of the Bridgeport and Stratford communities, UI contributed $2,000 to assist the American Red Cross with disaster relief. During the 2010 Employee Giving Campaign, employees generously pledged a portion of their paychecks to support 206 charitable causes, resulting in a total contribution of $141,000 with an additional company match of $63,000. 2010 Charitable Giving
Civic & Community 19% Arts & Culture 5%

Health & Human Services 10%

Economic Development 53%

UI understands that although financial Education support to the community is essential, it 13% is equally important to have employees engaged in the community by serving on nonprofit boards and committees. Employees bring skill sets that can help nonprofits, and they truly enjoy being involved and making a difference in the community.
SUSTAINABILITY IN ACTION:

Nonprofits reap funds from UI recyclables At some UI locations, depositing a bottle or can into a recycling bin is more than just a good sustainability practice. Its also a donation to a good cause. Special bins have been set up at UIs facilities for recyclable bottles and cans. Theyre collected by representatives of various nonprofit agencies, which redeem them to fund programs and activities. Residents of Opportunity House, Inc. visit UI locations in New Haven, North Haven and Milford, Connecticut, once a week to pick up recyclables. Opportunity House, a nonprofit organization that serves the needs of autistic adults, operates three group homes and two employment programs in Hamden, Connecticut. Funds collected help provide recreational activities for residents there.

Opportunity House residents Stephen Allyn, second from left, and Stephen Pelley, right, hold bags of collected recyclables as staffers Tamara Dumas and Jeff Lewis provide support.

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The residents of Opportunity House, Inc. are extremely grateful for this mutually beneficial partnership with UI. For approximately 15 years, the UI program has offered our adults with autism a purposeful community activity with both social and environmental rewards. Special thanks go to the UI employees for allowing this program to flourish, said Robert D. Young, executive director of Opportunity House, Inc. At UIs Shelton locations, bottles and cans are donated to the Birmingham Group of Ansonia, Connecticut, which provides mental health, addiction and domestic-violence counseling services. The program, now headed up and expanded by UIs Business Enterprise Sustainability Team, reduces the volume of recyclable goods that would otherwise end up in landfills. It also serves a social need and spares UI the cost of collecting those recyclables. Its is a small but significant example of how practicing sustainability can simultaneously demonstrate environmental, social and fiscal responsibility. ASSISTANCE PROGRAMS UI provides a variety of programs to help customers who are struggling with rising energy costs. UIs Matching Payment Program (MAPP) and Forgiveness Program help income-eligible customers maintain year-round service and pay down delinquent balances by matching customers payments with company dollars. The following chart shows the number of customers participating in these programs in 2010 and UIs matching contribution based on customers payments: Year 2010 Program UI MAPP Forgiveness Customers Participating 1,959 831 2,790 UI Matching Contribution $4,600,000 $408,000 $5,008,000

UI also conducted outreach efforts to educate and inform customers about state assistance programs and to solicit charitable giving for these programs. Financial assistance packages were mailed to 18,455 UI incomeeligible customers. E-mails were sent to 49,000 UI customers who were not already enrolled in Operation Fuels Add a Dollar campaign, encouraging them to join. In addition, mailings were sent to commercial and industrial customers, explaining commercial rates, promoting supplier choice, seeking donations to Operation Fuels residential program and promoting program assistance available from the Connecticut Economic Development Fund.

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EMERGENCY PREPAREDNESS AND BUSINESS CONTINUITY PLANNING Energy utilities play a critical role in the security of our immediate communities and the nation, and we have obligations to continue to operate under the most trying circumstances. Business Continuity Planning is the process that UI uses to ensure the survivability and sustainability of our critical business processes during events that significantly disrupt these processes. It is implemented in all our divisions and focuses on recovering from the loss of one or more of the core components required to operate a business process for example, access to key personnel, access to facilities or equipment, and access to systems and data. In the event of an emergency or natural disaster, we follow documented processes and methodology, focusing on employee and public safety and communication. We hold annual drills simulating a variety of emergency scenarios, from major storms to flu outbreaks. Developing a robust and disciplined business continuity strategy that meets the needs of our customers while ensuring we can respond to the threats inherent in any business environment helps us prepare to meet any challenge and provide value to all our stakeholders.

Looking Ahead
Providing safe, reliable, high-quality service to our customers is our business. Doing it in a way that reflects our values and enables us to engage in our communities in a positive, supportive and productive way is our commitment and our responsibility. As you can see by the efforts outlined in this report, our company has accomplished a great deal of good over the last several years, and these socially and environmentally responsible efforts are often overlooked. However, that is not to say that we are where we want to be. We our company and our industry have a long way to go to secure a cleaner, safer and more secure energy future. In upcoming years we will face regulatory, operational and financial challenges as we move toward this future. We will need to balance what we know is necessary to get there with the need to ensure that access to energy remains affordable to all. As our business expands to incorporate three regional natural gas utilities and new electricity generation facilities, we will be challenged with folding them into our sustainability efforts. These challenges are also opportunities around which we build our goals. In particular, in the year ahead our sustainability goals will include a greenhouse gas emissions reduction target associated with specific initiatives undertaken in 2011. In addition, we will focus on integrating the gas companies into our efforts; developing a more comprehensive set of metrics and key performance indicators for sustainability going forward; improving and formalizing our data tracking and collection for future carbon inventories; and providing internal education, awareness and support to advance the understanding of sustainable business practices throughout our company. We know we are at the very beginning of our own sustainability journey and that we have much to learn and accomplish, but we know that traveling down this path is not only necessary its the right thing to do.

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For more information about UI and our sustainability efforts, and to view or download this report, please visit us at: www.uinet.com/sustainability If you have comments, suggestions or questions about this report, please contact: Marissa Westbrook at marissa.westbrook@uinet.com

FPO

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The Forest Stewardship Council (FSC) is an international certification and labeling system for products that come from responsibly managed forests and verified recycled sources. FSC certified forest products are verified from the forest of origin through the supply chain, including pulp providers, mills, merchants and printers. All members of this supply chain must obtain FSC certification in order for a product to carry the FSC logo.

The United Illuminating Company P.O. Box 1564 New Haven, CT 06506-0901