Certain statements contained herein, regarding matters that are not historical facts, are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). These include statements regarding management's intentions, plans, beliefs, expectations or forecasts for the future. Such forward-looking statements are based on UIL Holdings Corporation's expectations and involve risks and uncertainties; consequently, actual results may differ materially from those expressed or implied in the statements. Such risks and uncertainties include, but are not limited to, general economic conditions, legislative and regulatory changes, changes in demand for electricity and other products and services, unanticipated weather conditions, changes in accounting principles, policies or guidelines, and other economic, competitive, governmental, and technological factors affecting the operations, markets, products and services of UIL Holdings Corporation's subsidiary, The United Illuminating Company. The foregoing and other factors are discussed and should be reviewed in UIL Holdings Corporation's most recent Annual Report on Form 10-K and other subsequent periodic filings with the Securities and Exchange Commission. Forward-looking statements included herein speak only as of the date hereof and UIL Holdings Corporation undertakes no obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances.

UIL Holdings Corporation's (UIL Holdings') financial condition and financing capability will be dependent on many factors, including the level of income and cash flow of UIL Holdings' subsidiaries, conditions in the securities markets, economic conditions, interest rates, legislative and regulatory developments, and its ability to retain key personnel.

The loss of key personnel or the inability to hire and retain qualified employees could have an adverse effect on the business, financial condition and results of operations for UIL Holdings and The United Illuminating Company (UI). These operations depend on the continued efforts of their respective current and future executive officers, senior management and management personnel. UIL Holdings cannot guarantee that any member of management at the corporate or subsidiary level will continue to serve in any capacity for any particular period of time. In an effort to enhance UIL Holdings' ability to attract and retain qualified personnel, UIL Holdings continually evaluates the overall compensation packages offered to employees at all levels of the organization.

UI is an electric transmission and distribution utility whose structure and operations are significantly affected by legislation and regulation. UI's rates and authorized return on equity are regulated by the Federal Energy Regulation Commission (FERC) and the DPUC. Legislation and regulatory decisions implementing legislation establish a framework for UI's operations. Other factors affecting UI's financial results are operational matters, such as the ability to control expenses, manage uncollectibles and capital expenditures, in addition to sales volume and major weather disturbances. The extent to which sales volume will have an impact on UI's financial results will depend on the implementation of the distribution revenue decoupling provided for in the 2008 Rate Case final decision as described below, however, sales volume is not expected to have an impact on distribution earnings during the two-year decoupling trial period established in the final decision. UI expects significant capital investment in its distribution and transmission infrastructure.

Generation

GenConn Energy LLC (GenConn) is a 50-50 joint venture of UI and NRG. In 2008, the DPUC selected two projects proposed by GenConn to help address Connecticut's growing need for more power generation during the heaviest load periods.

Two peaking generation projects, each with a nominal capacity of 200 megawatt (MW), are to be built at NRG's existing Connecticut plants in Devon and Middletown. The Devon peaking plant, which is scheduled to be in operation by June 1, 2010, and the Middletown plant, which is scheduled to be in commercial operation by June 1, 2011, will both be owned by GenConn. GenConn has signed contracts for differences (CfD) for both projects with The Connecticut Light & Power Company (CL&P). The cost of the contracts will be paid by customers and will be subject to a cost-sharing agreement whereby 20% of the cost is borne by UI customers and 80% by CL&P customers.

As a result of changed market conditions and updated cost information, GenConn estimates that project costs, including financing costs, may increase over the proposal it had originally submitted to the DPUC. The increase is driven primarily by increased financing costs and the cost to build interconnection facilities at the Middletown site. As described in the related DPUC decision, reasonable financing costs and interconnection costs will be treated as pass-through costs, which GenConn expects to recover in DPUC-approved future revenues. Once approved, GenConn revenue requirements will come from the ISO New England Markets in which GenConn participates. The CfD will provide for a true-up to any over or under collections from the ISO markets.

On April 27, 2009, UI closed on a bank financing in the amount of $121.5 million with a syndicate of banks (the "Equity Bridge Loan" or "EBL"), the proceeds of which will be used by UI to fund its commitments as a 50% owner of GenConn. GenConn will direct $57 million of such amount to GenConn Devon LLC (GenConn Devon) and $64.5 million to GenConn Middletown LLC (GenConn Middletown), each of which is a wholly owned subsidiary of GenConn, for use in the construction of peaking generation facilities by those entities. UI will draw on this facility as needed to fund its commitments to GenConn as construction progresses. UI does not have any further funding commitments to GenConn at this time and does not guarantee any of GenConn's obligations.

GenConn obtained project financing on April 27, 2009 in a separate transaction that makes $243 million available to GenConn for construction and related activities, and $48 million available under a working capital facility (collectively, the "Project Financing"). UI expects that those funds, together with the funds committed by UI and GenConn's other 50% owner, NRG Energy, will be sufficient to allow GenConn to complete the construction of its planned peaking generation facilities.

The EBL will be repaid upon the earlier of the maturity date or attainment of commercial operation which is expected to be June 2010 for the GenConn Devon and June 2011 for GenConn Middletown. The initial maturity date of the loan is April 27, 2010, and may be extended to June 1, 2011, so long as that on the date of extension project construction is continuing and the Project Financing is not due and payable.

As a result of GenConn obtaining the Project Financing, UIL Holdings' obligations under guarantee agreements it had made with an affiliate of General Electric Company (GE) in connection with the purchase of GE turbines by GenConn Devon and GenConn Middletown were terminated. Those guarantees were in the amounts of $16.7 million and $30.0 million, respectively, as of March 31, 2009.

Contracts for Differences

In accordance with SFAS No. 157, "Fair Value Measurements" (SFAS No. 157), UIL Holdings applies fair value measurements to certain assets and liabilities, a portion of which fall into Level 3 of the fair value hierarchy defined by SFAS No. 157 as pricing inputs that include significant inputs that are generally less observable from objective sources. As of March 31, 2009, the assets and liabilities that are accounted for at fair value on a recurring basis as Level 3 instruments are contracts for differences, which represent 66.3% of the total amount of assets, and 100% of the total amount of liabilities, respectively, accounted for at fair value on a recurring basis. The determination of fair value of the contracts for differences is based on a probability-based expected cash flow analysis that is discounted at risk-free interest rates and an adjustment for non-performance risk using credit default swap rates. Certain management assumptions were required, including development of pricing that extended over the term of the contracts. In addition, UIL performs an assessment of risks related to obtaining regulatory, legal and siting approvals, as well as obtaining financing resources and ultimately attaining commercial operation. The DPUC has determined that costs associated with these contracts for differences are fully recoverable. As a result, there is no impact to net income as any unrealized gains/(losses) are recovered through the regulatory assets/(liabilities) that have been established for the purpose of such recovery.

Legislation & Regulation

2008 Rate Case

On February 4, 2009, the DPUC issued its final decision regarding UI's application requesting an increase in distribution rates, the results of which included a $6.13 million increase in revenue requirements for 2009, compared to 2008. Because an increase in revenue requirements for 2009 resulting from the 2005 Rate Case had gone into effect January 1, 2009, UI returned approximately $0.97 million to ratepayers through a one-time adjustment in April 2009. The 2009 decision provides for an allowed distribution return on equity of 8.75%, a decrease from

9.75% allowed in the 2005 Rate Case, and a capital structure of 50% equity and 50% debt compared to 48% equity and 52% debt in the 2005 Rate Case. The decision continues the prior earnings sharing mechanism structure, applying to the new 8.75% allowed return, whereby 50% of the earnings over the allowed annual level is returned to customers and 50% is retained by UI. The decision provides for recovery of updated pension and postretirement expense for 2010 based upon the December 31, 2009 valuation. The decision provides for an additional increase in distribution revenue requirements of $19.14 million for 2010.

The February 2009 decision also provides for the establishment of an annual $10.2 million regulatory asset to address a portion of the actual increase in pension and postretirement expense for 2009 and 2010, a provision for decoupling of distribution revenues from sales, and a partial reconciliation for the as-issued cost of new debt.

On February 18, 2009, UI filed a request for reconsideration with the DPUC regarding clarification on various technical issues related to the interest rate tracker, the full decoupling provision and other matters. The DPUC reopened the proceeding to consider UI's request. On April 22, 2009, the DPUC issued a draft decision in the reopened proceeding that, if adopted as the final decision, would correct certain technical issues, clarify other issues raised by UI and increase UI's revenue requirements by $655,000 and $939,000 for 2009 and 2010, respectively. On May 4, 2009, UI submitted written exceptions to the DPUC. A final decision is expected in June 2009.

On March 13, 2009, UI requested a further reopening of the rate case decision to address the decisions allowed distribution return on equity of 8.75%. The DPUC has scheduled oral arguments to take place on May 11, 2009 to determine whether the proceeding should be reopened.

2009 Rates

In December 2008, the DPUC issued a letter ruling to address changes to all of UI's rate components effective as of January 1, 2009. The letter ruling approved requested changes to UI's distribution charges as well as changes to UI's transmission, Systems Benefits Charges (SBC), and Non-Bypass able Federally Mandated Congestion Charges (NBFMCC). The letter ruling also approved Generation Services Charge (GSC) rates for the twelve-month period from January 1, 2009 through December 31, 2009, and last resort service GSC rates for the January 1, 2009 through March 31, 2009 time period. On February 20, 2009, UI received a letter ruling approving last resort service GSC rates for the April 1, 2009 through June 30, 2009 time period. As discussed in the 2008 Rate Case section above, a one-time adjustment of approximately $0.97 million was returned to customers in April 2009.

Power Supply Arrangements

UI's retail electricity customers are able to choose their electricity supplier. Since January 1, 2007, UI has been required to offer standard service to those of its customers who do not choose a retail electric supplier and have a maximum demand of less than 500 kilowatts. In addition, UI is required to offer supplier of last resort service to customers who are not eligible for standard service and who do not choose to purchase electric generation service from a retail electric supplier licensed in Connecticut.

UI must procure its standard service power pursuant to a procurement plan approved by the DPUC. The procurement plan must provide for a portfolio of service agreements procured in an overlapping pattern over fixed time periods (a "laddering" approach). In June 2006, the DPUC approved a procurement plan for UI. As required by the Connecticut statute, a third party consultant retained by the DPUC works closely with UI in the procurement process and to provide a joint recommendation to the DPUC as to selected bids.

UI has wholesale power supply agreements in place for the supply of all of UI's standard service customers for all of 2009, 80% for 2010 and 40% for 2011. Supplier of last resort service is procured on a quarterly basis. UI determined that its contracts for standard service and supplier of last resort service are derivatives under SFAS No. 133 and elected the "normal purchase, normal sale" exception under SFAS No. 133. UI regularly assesses the accounting treatment for its power supply contracts.

As a result of an April 2008 DPUC decision, UI is permitted to seek long-term contracts for up to 20% of standard service requirements. UI is in the process of exploring long-term contract options through a joint effort with CL&P; no agreements have been entered into at this time.

Competitive Transition Assessment (CTA)

UI's CTA collection recovers costs that have been reasonably incurred, or will be incurred, to meet its public service obligations and that will likely not otherwise be recoverable in a competitive market. These "stranded costs" include above-market long-term purchased power contract obligations, regulatory asset recovery and above-market investments in power plants. A significant amount of UI's earnings is generated by the authorized return on the equity portion of unamortized stranded costs in the CTA rate base. UI's after-tax earnings attributable to CTA for the three month periods ended March 31, 2009 and 2008 were $1.9 million and $2.4 million, respectively. A significant portion of UI's cash flow from operations is also generated from those earnings and from the recovery of the CTA rate base. Cash flow from operations related to CTA amounted to $10.0 million and $9.6 million, respectively, for the three month periods ended March 31, 2009 and 2008. The CTA rate base has declined from year to year for a number of reasons, including: amortization of stranded costs, the sale of UI's nuclear units, and adjustments made through the annual DPUC review process. The original rate base component of stranded costs, as of January 1, 2000, was $433 million. It has since declined to $170.4 million at March 31, 2009. In the future, UI's CTA earnings will decrease while, based on UI's current projections, cash flow will remain fairly constant until stranded costs are fully amortized. Total CTA cost recovery is currently projected to be completed in 2015, with stranded cost amortizations expected to end in 2013. The date by which stranded costs are fully amortized depends primarily upon the DPUC's future decisions, which could affect future rates of stranded cost amortization.

Transmission Return on Equity (ROE)

UI's transmission and wholesale sales of electricity is regulated by the Federal
Energy Regulatory Commission (FERC). The FERC also, among other things, in its
orders, establishes allowable ROEs for various types of transmission assets.

Based on a March 2008 FERC Rehearing Order, the ROEs applicable to UI's
transmission business, is as follows:

                                 Existing Transmission  New Transmission
                                   PTF       Non-PTF    PTF (1)  Non-PTF
           2/1/05 to 10/30/06     10.90%      10.40%     11.90%   10.40%
           10/31/06 and forward   11.64%      11.14%     12.64%   11.14%

(1) ROE available for new Pool Transmission Facilities (PTF) identified by Independent System Operator - New England (ISO-NE) in its Regional System Plan for assets that were complete and on line prior to December 31, 2008.

In May 2008, several public entities, including the DPUC, filed a petition with the United States Court of Appeals for the District of Columbia Circuit (U.S. Court of Appeals) seeking judicial review of the Rehearing Order. In particular, the petitioners seek review of FERC's approval of the 100 basis point ROE adder for new transmission investment, FERC's approval of the updated going forward ROE in general and FERC's reliance on U. S. Treasury bond yields as a basis for the going forward adjustment. Briefing in the judicial review proceeding is on-going. UI is unable to predict the outcome of these proceedings at this time.

UI's overall transmission ROE will be determined by the mix of UI's transmission rate base between new and existing transmission assets, and whether such assets are PTF or non-PTF. UI's transmission assets are primarily PTF. For 2009, UI is estimating an overall allowed weighted-average ROE for its transmission business of 12.30% to 12.50%.

With the substantial completion of the divestiture of Xcelecom, UIL Holdings is no longer subject to the same level of operating risk factors that affected the financial results of Xcelecom in prior reporting periods. UIL Holdings' exposure regarding Xcelecom is now primarily related to (1) the collection of accounts receivable and promissory notes related to the sales of certain Xcelecom companies, (2) its indemnification obligations to the buyers of the former Xcelecom companies and (3) Thermal Energy Inc.'s operation of an energy center in New Haven, CT.

UIL Holdings has retained primary risk management and insurance exposures on Xcelecom's completed operations in the area of bodily injury, property damage, uncompleted projects, professional, employment practice and fiduciary responsibility. To assist in minimizing the risk exposures, UIL Holdings secured completed operations insurance coverage for third party liability claims subject to a deductible. Losses, if any, are accrued based upon UIL Holdings' estimates of the liability for claims incurred and an estimate of claims incurred but not reported. UIL Holdings reviews the general liability reserves quarterly to ensure the adequacy of those reserves.

UIL Holdings generates its capital resources primarily through operating and financing activities. At March 31, 2009, UIL Holdings had $25.5 million of unrestricted cash and temporary cash investments. This represents an increase of $17.8 million from the corresponding balance at December 31, 2008. The components of this increase, which are detailed in the Consolidated Statement of Cash Flows, are summarized as follows:

Unrestricted cash and temporary cash investments, December 31, 2008      $           7.7

Net cash provided by operating activities                                           32.0

Net cash provided by (used in) investing activities:
Related party note receivable                                                       (8.5 )
Cash invested in plant - including AFUDC debt                                      (31.6 )
Restricted cash (1)                                                                 (0.2 )
                                                                                   (40.3 )

Net cash provided by (used in) financing activities:
Financing activities, excluding dividend payments                                   37.1
Dividend payments                                                                  (10.9 )
                                                                                    26.2

Net change in cash                                                                  17.8

Unrestricted cash and temporary cash investments, March 31, 2009         $          25.5

(1) As of March 31, 2009, UIL Holdings had $11.3 million in restricted cash which primarily relates to certain retention amounts concerning the Middletown/Norwalk Transmission Project which have been withheld by UI and will remain in place until the completion of the project and verification of fulfillment of contractor obligations.

The unrestricted cash position of UIL Holdings increased by $17.8 million from December 31, 2008 to March 31, 2009, as cash provided by operating and financing activities exceeded cash used in investing activities. Cash used in investing activities during the first quarter of 2009 consisted primarily of capital expenditures of $31.6 million for distribution and transmission infrastructure as well as an additional $8.5 million in funds loaned to GenConn to fund GenConn's construction and other cash needs until permanent financing could be arranged. Cash provided by financing activities during the first quarter of 2009 included $25 million from long-term debt, $17 million from short-term debt, partially offset by the quarterly dividend payments on UIL Holdings' common stock totaling $10.9 million and $4.3 million in principal payments on UIL Holdings' long-term debt.

UIL Holdings accesses capital through both long-term and short-term financing arrangements. Total current and long-term debt outstanding as of March 31, 2009 was $630.0 million, as compared to $604.3 million at year-end December 31, 2008.

UIL Holdings and UI have a revolving credit agreement with a group of banks that extends to December 22, 2011. The borrowing limit under the facility for UI is $175 million, with $50 million of the limit available for UIL Holdings. The facility permits borrowings at fluctuating interest rates determined by reference to Citibank's New York base rate and the Federal Funds Rate (as defined in the facility), and also permits borrowings for fixed periods up to six months as specified by UI and UIL Holdings at fixed interest rates determined by the Eurodollar interbank market in London (LIBOR). The facility also permits the issuance of letters of credit up to $50 million. UI had $160 million outstanding under the facility and UIL Holdings had a standby letter of credit outstanding in the amount of $1 million as of March 31, 2009. The UIL Holdings standby letter of credit reduces the amount of credit available for UI, and, given the current amounts outstanding, UI's borrowings and standby letter of credit outstanding reduce the amount of credit available for UIL Holdings. Available credit, under this facility, at March 31, 2009 for UI and UIL Holdings in the aggregate was $14 million.

In November 2008, UI entered into a revolving credit agreement (the "Agreement") with Union Bank of California, N.A, ("UBOC"), which was to extend to May 25, 2009. The borrowing limit under this facility was $25 million. As of March 31, 2009, UI did not have any short-term borrowings outstanding under this facility. As a result of UI obtaining the EBL, the Agreement was terminated on April 27, 2009.

At March 31, 2009, UIL Holdings' current liabilities of $371.0 million exceeded current assets of $282.9 million creating a working capital deficit. The working capital deficit relates primarily to increases in short-term debt to fund the growth in UI's capital expenditure program. As described above, UIL Holdings and UI have a revolving credit agreement which extends to December 22, 2011. While the Company reports these borrowings against this facility as short-term debt, the agreement has longer term commitments from banks allowing the Company to borrow and reborrow, at its option, funds through 2011 affording it flexibility in managing to its working capital requirements.

Conditions in the capital markets have continued to result in reductions in asset values for funded pension and postretirement plans. These reductions, if not offset by gains in future years, will result in higher pension and postretirement expenses in future years along with additional cash contributions. Due to the reduction in asset values, UI currently expects to make the minimum pension contribution required under ERISA of approximately $6 million for the 2009 plan year. As of March 31, 2009, excluding the impact of benefit payments and plan expenses, the fair market value of pension assets has experienced an additional decline of approximately $18.7 million since December 31, 2008.

All capital requirements that exceed available cash will have to be provided by external financing. Although there is no commitment to provide such financing from any source of funds, other than the short-term credit facility discussed above, future external financing needs are expected to be satisfied by the issuance of additional short-term and long-term debt. In addition to debt financing, UIL Holdings expects to seek to access the external equity markets to raise capital. The continued availability of these methods of financing will be dependent on many factors, including conditions in the securities markets, economic conditions, and UIL Holdings' future income and cash flow. See Part I, Item 1, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note (B), Capitalization and Note (D), Short-Term Credit Arrangements" of this Form 10-Q for a discussion of UIL Holdings' financing arrangements.

GenConn has approval from the DPUC to build 200 MW of nominal capacity at NRG's existing plant in Devon, CT (the "Devon Project") and 200 MW of nominal capacity at NRG's existing plant in Middletown, CT (the "Middletown Project"). UI and NRG had each arranged to lend to GenConn $48.5 million to fund GenConn's construction and other cash needs until permanent financing was arranged. As of March 31, 2009, GenConn had borrowed $44.0 million from each of UI and NRG under identical promissory notes, for the Devon and Middletown Projects. In connection with the closing by UI on the EBL and on Project Financing by GenConn on April 27, 2009, all outstanding balances were replaced by a new promissory note.

GenConn expects to finance 50% of its capital requirements with the proceeds of the Project Financing it obtained on April 27, 2009. UI and NRG will each make an equity investment in GenConn on a 50%/50% basis to meet the remaining 50% of GenConn's capital requirements. Such equity investments, each in the amount of approximately $60 million, are expected to occur within the first six months of 2010 for the Devon Project and within the first six months of 2011 for the Middletown Project. UI expects to use the proceeds of the EBL it obtained on . . .