National Gas Policy and the Stimulus Impact

1. National Gas Policy and the Stimulus Impact John Erickson American Public Gas Association August 25, 2009

2. American Public Gas Association • ~1000 community-owned gas systems • 37 states • >5M Customers • ~21,000 Employees • ~120,000 Miles of Main • Systems size (Meters): 12 to ~500,000 • Largest cities: Philadelphia, San Antonio, Indianapolis, Memphis, Long Beach, Richmond, Colorado Springs, Mesa • Freedom, OK (12 meters) • Annual Conference, Indianapolis, IN (August)

3. U.S. Municipal Gas Systems

4. Public Gas Systems # of Employees

5. Public Gas Systems # of Customers

6. Priority #1 The Safe and Reliable Delivery of Affordable Natural Gas at Just & Reasonable Rates

7. National Gas Policy • Climate Change • Supply • Market Transparency • Overhaul of the Financial Markets • Section 5 Reform • Stimulus Package

8. Climate Change • Focus of both Congress and the Administration • Significant Impact on Natural Gas LDC’s • House Passed Legislation on June 26th by a 219-212 vote • Significant impact on natural gas • Fuel switching • Increased demand • Cap on emissions • Point of regulation

9. U.S. GHG Emissions – 2005

10. What is Cap and Trade?

11. Climate Change Legislation • Waxman-Markey American Clean Energy Security Act (H.R. 2454) • The bill includes: • Carbon Reduction Program (83% by 2050) • Renewable Electricity mandate • Carbon Labeling • Energy Efficiency mandate for gas & electric mandate removed

12. Waxman/Markey Bill • Emissions Cap begins is 2012 • Gas LDCs come under cap in 2016 • Gas LDCs with 475, 000 MCF (25,000 Co2 equivalent) • Industrial users over 475,000 MCF responsible to track their own emissions

13. Waxman/Markey Bill • Gas prices will likely increase due to fuel switching • Gas LDCs will get 9% of “free allowances” • Sale of those must be used to protect consumers from gas price increases • Buy remaining allowances if you don’t meet your yearly targets – auction or open market • Recent CBO report estimates cost to consumers about $175 per year

14. What can Gas LDCs expect under a climate program? • Tracking your emissions • EPA registry rule • www.apga.org/calculator • Yearly compliance with EPA - permits • Potentially buying & selling allowances on the market or buying from a government auction • Find ways to reduce emissions to meet the cap (efficiency, load reduction, etc.) • Stress on U.S. natural gas supply and price from fuel switching

15. Access to U.S. Supply APGA has long maintained the additional supply is a fundamental component to long-term affordable natural gas

16. Supply Estimates Up *35% increase from last report

17. Supply Examples

18. Access to U.S. Supply Moratoria removed last year on OCS on East and West Coast A recent Senate Energy bill contains language that opens Eastern Gulf of Mexico for E&P Dept. of Interior finalizing rules on E&P on federal lands

19. Market Transparency • Restore public confidence in the pricing of natural gas • Transparency must assure consumers that market prices are a result of fundamental supply and demand forces and not the result of manipulation or other abusive market conduct • APGA supported legislation became law as part of 2008 Farm Bill • CFTC and Congress continue to focus on oversight and transparency

20. Overhaul of Financial Markets • Language added to the Waxman/Markey Bill that addresses regulation of the over-the-counter (OTC) market. • House and Senate moving to address derivatives reform legislation • Move towards mandatory clearing will impact the natural gas industry on multiple levels

21. Natural Gas Act Section 5 – FERC Refund Authority • APGA is pushing Congress to change the law to give the agency that oversees interstate pipeline rates, Federal Energy Regulatory Commission (FERC), refund authority to protect consumers.

22. Natural Gas Act Section 5 – FERC Refund Authority • Certain pipelines are proven to be over-charging consumers • This authority would allow FERC to grant refunds to consumers when it is proven a pipeline is charging more than just and reasonable rates

23. Natural Gas and the Stimulus Package • The American Reinvestment and Recovery Act of 2009 (Stimulus Bill) signed into law February on 17, 2009 • The legislation allocates $787 billion to help stimulate the US economy • Dollars available reduce over time

24. Stimulus Dollars to Energy • 6.4% of the package designated to energy • $32.5 billion in programs allocated to State Energy Agencies. • $11.0 billion in programs directly funded by the Department of Energy • Some provisions are specifically designated to investment in electric generation, transmission and distribution

25. An Example of State Program Funding • $5 billion for Weatherization Programs • $4.3 billion for Low Income Energy Efficiency • $3.2 billion for Energy Efficiency and Conservation Grants • $3.1 billion for State Energy Program Grants • $2.4 billion for Housing and Urban Development energy programs • $1.0 billion for Appliance Rebates and Efficient Fleets

26. Opportunities for Potential Stimulus Bill Funding • State energy efficiency programs • Weatherization • State energy conservation block grants • Housing and Urban Development energy efficiency projects • Tax credits and rebates for appliances and weatherization • Natural Gas Vehicles • Reimbursement for relocation expenses • Develop new natural gas service conversion offers from competing fuels (i.e. propane and fuel oil) that leverage funding from the Stimulus Bill

27. Definition of Reportable Incident • Proposed by PHMSA Comments due 8/31 • Any event where gas ignites would be reportable, regardless of property loss • Events where house fires involve the meter would be reportable if the house cost more than $50,000 • Volumetric criteria (3 MMCF) • Encourage utilities to file comments by 8/31

28. WWW.APGA.ORG