Dominion East Ohio Auction Information Meeting

Dominion East OhioAuction InformationMeeting
December 1, 2011

Meeting Agenda Background Information General Auction Structure Auction Process Energy Choice Supplier Options Capacity Release Process Other Considerations

Background Information

Dominion East Ohio Market DEO serves 1.2 million customers in northern and eastern Ohio with 2010 throughput of over 253 Bcf Two primary operating areas – East Ohio and West Ohio (Lima) East Ohio operating area served by company-owned storage, local production and interconnects with ANR Dominion Transmission North Coast Transmission (intrastate) Panhandle Eastern Rockies Express Tennessee Texas Eastern West Ohio operating area served by Columbia Transmission and ANR

DEO’s Commodity Market Goals Key Objectives: Foster a competitive market in which customers can make informed choices among expanded alternatives while ensuring reliable commodity service by suppliers. Address the commodity service needs of those customers that cannot or will not choose among those alternatives without disrupting the competitive marketplace.

Replacement of GCR Mechanism As DEO’s Energy Choice program grew, parties recognized that the GCR mechanism did not send proper price signals In 2005, DEO proposed to replace the GCR with a NYMEX-based monthly price under a Standard Service Offer (SSO) SSO = Prompt Month NYMEX + Retail Price Adjustment Retail Price Adjustment equals the difference between the $/Mcf to be billed customers over the month and the NYMEX settlement price for that month on the final day of trading Retail Price Adjustment includes all costs for: Upstream transportation to city gate Btu conversion DEO fuel retention ECPS pooling and other fees Uncertainty of aggregate load to be served Unique nature of the commodity service

DEO Commodity Market Transformation DEO began its commodity market transformation by conducting an SSO auction in 2006 In an SSO auction, DEO’s wholesale supply volume, not actual customers, is bid out Market to be supplied is divided into slices (tranches) Maximum share per supplier is for one-third of total available Bidders are pre-approved for creditworthiness In 2009, DEO conducted its first Standard Choice Offer (SCO) auction in which the retail supply obligation for Choice-eligible customers is bid out Promotes a direct retail relationship between customer and supplier Same general process as SSO, i.e., market divided into tranches, one-third share maximum, credit pre-approval, etc. Bidders must be certified to provide Energy Choice service Supplier name and contact info appears on the bill SSO and SCO pool operations and fees are nearly identical to those of the Energy Choice program

Auction Results Up to This Point 8/061st SSO auction ($1.44) 7/082nd SSO auction ($2.33) 2/093rd SSO auction ($1.40) 1st SCO auction ($1.40) 2/104th SSO auction ($1.20) 2nd SCO auction ($1.20) 3/115th SSO auction ($1.00) 3rd SCO auction ($1.00)

Energy Choice Enrollments

Energy Choice Market Shares – 11/11 Other 24 Aggregation (27%) E D C A B

SCO Customer Migration

Types of DEO Customers MVR suppliers must have a competitive MVR posted on their list of active offers available to all eligible customers on PUCO’s Apples-to-Apples Chart MVR cannot exceed any of the supplier’s competitive MVRs for the same billing period

Choice-Eligible Customer Default Commodity Service New customers include those establishing service for first time, relocating without portable agreement, or restoring service more than 10 days after being disconnected All of the above customers will initially be placed on SSO service for up to two months Choice-eligible customers served under SSO, SCO and MVR are eligible to be included in opt-out aggregation programs

Pre-SSO (9/06) to Today (11/11)

November 2011 Customer Composition E Energy Choice customers include those participating in Opt-in Governmental Aggregation programs Opt-outGovernmental Aggregation customers do not affirmatively elect to participate C A B

General Auction Structure

February 2012 Auction After discussions with numerous stakeholders, DEO will formally request PUCO approval to conduct a single auction that combines both SSO wholesale load and SCO retail customers in each tranche PUCO must approve the request in order for the change to be implemented DEO anticipates timely approval In the event the request is not approved, DEO will conduct separate SSO and SCO auctions using the same format as last year See www.dom.com for details from 2011 auction if interested in the prior auction structure

February 2012 Auction SSO market includes PIPP, Choice-ineligible and “Transitional” customers for up to two months (see Choice-Eligible Customer Default Commodity Service slide) All existing SCO customers as of March 2012 will be reassigned to new winning suppliers as of April 2012 MVR customers will remain with their existing supplier

Proposed Auction Process Timing * DEO makes no representation regarding the timing of a PUCO ruling

Auction Structure Internet-based descending clock auction administered by World Energy Term of commodity service obligation is April 2012 to March 2013 Round includes bidding/reporting phases - duration may change during the auction Descending clock auction process: Supplier bids # of tranches it would supply at the Going Price Going Price is reduced round-by-round until market is cleared Going Price = Fixed adder to NYMEX settlement price for prompt month Initial Going Price and decrement pricing may change during the auction Options if not enough tranches are bid upon in the first round: Increase Initial Going Price or # of tranches a bidder can win Postpone the auction or terminate it and return to GCR Sealed bid if # of tranches bid in round falls below # needed to clear market

Bid Review and Approval In prior auctions, PUCO Staff filed its post auction report on the same day as the auction PUCO has approved the auction results the following day DEO has executed supply agreements with suppliers later that same day PUCO has ability to reject results if it concludes there were material deficiencies in the auction process, that the final Going Price is unacceptable, or for any other reason(s) it deems appropriate Because the PUCO is not obligated to rule on the auction results within a specific timeframe, DEO cannot provide assurance that the prior timeline will be followed Within 30 days after PUCO ruling, DEO will return or cancel any security that was provided by unsuccessful bidders

Bidder Pre-Qualification/Certification Suppliers must submit financial statements with Bidder Application Form to facilitate creditworthiness review Collateral requirement for single tranche will based on Energy Choice creditworthiness provisions Collateral Requirement per tranche = $510,000 This does not include the Default Fee Registered bidders must provide initial capacity and supply plan with following elements (East Ohio and West Ohio areas are separate pools) Anticipated capacity portfolio by month by upstream pipeline and on-system storage Monthly supply plan to meet East Ohio and West Ohio market needs and on-system storage ratchets by source (upstream pipeline, local production and on-system storage)

Registered Bidder Restrictions May participate on stand-alone basis or as part of joint arrangement, but not both Joint bidders must identify all parties involved May not have controlling interest, corporate affiliation with, or > 10% stake in another bidder May not have relationship with another bidder that includes supply arrangements or provides incentives based on auction outcome Must maintain confidentiality of bidding strategy and not retain advisors/consultants used by other bidders Must maintain confidentiality of discounted rates for pipeline capacity

On-Line Documents (www.dom.com) 1 2012-2013 Auction Information 2 & 3 Case No. 07-1224-GA-EXM Stipulation, Opinion and Orders 4 SSO Gas Purchase Contract, Special Provisions 5 ECPS Terms and Conditions 6 Customer Load Profile Data 7 Collateral Requirement Formula 8 Isolated Delivery Points 9 Asset Allocation Spreadsheet s 10 Interstate Pipeline Contracts to be Assigned and Process 11 & 12 Bidder Application Form, Bidder Registration Form 13 Supply Templates and Instructions 14 Frequently Asked Questions 15 Auction Meeting Presentation 16 SCO Letter Agreement 17-19 Links to tariff pages, auction examples, and other data 20 Auction Instructions (Coming Soon)

Auction Process

Combined SSO/SCO Auction DEO will be conducting only ONE (1) Auction Winning bidders awarded SCO customers AND a slice of the SSO load SSO portion will be administered as a separate pool over the term Total load of ~35.5 Bcf divided over nine (9) tranches Bidders must be certified CRNGS providers to participate

One Auction – Default Fee One Default Fee to be posted per winning supplier Estimated at $610,000 per tranche. Will be updated when final tranche information is set. Default Fee must be in form of a Letter of Credit or Surety Bond only Fee = $0.20/Mcf for remaining months’ estimated requirements Fee may increase $0.06/Mcf for every $1.00 increase in weighted average NYMEX strip price over remaining term (as compared to average strip price day of the auction) Fee updated during winter months only

Auction Rules Each supplier is given only one ID for use during the actual auction Each round may start with two 10-minute phases for bidding and reporting (subject to change after consultation with PUCO Staff) Total number of tranches bid in the round is announced at the end of reporting period (no reporting of individual supplier bids) Bids can be changed or withdrawn during bidding phase, but last bid indicated is binding Once a supplier drops out, its access to auction information ceases Bidding phase can be extended once each round with suppliers given two opportunities apiece to request an extension Round duration, Initial Going Price and subsequent Price Decrements are subject to change after consultation with PUCO Staff Supplier identities are kept confidential until released by PUCO

End of Auction Procedure Auction stops once number of tranches bid equals the number needed If an over-supply round is followed by an under-supply round, the suppliers that participated in the last over-supplied round will be required to submit a sealed bid Bids must be submitted to the whole penny The sealed bid indicates the minimum Retail Price Adder that a supplier is willing to accept to serve a single tranche All suppliers participating in the last over-supplied round must submit a bid even if it is equal to the Going Price of the last over-supplied round (there is no minimum bid) DEO will use the minimum sealed bid price that clears the market as the final Going Price for the auction If more than nine tranches are bid at the same price, the load will be prorated among those suppliers that submitted a bid at that price

Nature of SSO Service Full requirements obligation to provide a portion of the daily gas supply requirements of DEO’s Choice-ineligible customers Supply volume, not actual customers, will be awarded: Aggregate load of ~17.7 Bcf Customers continue to be served under Sales tariffs SSO pool customer load will change for various reasons, including: Weather conditions / usage equation updates Participation in Energy Choice / aggregation programs Level of PIPP program participation New customer additions / termination & restoration of service Supplier default (none since 10/00 program inception) SSO commodity service is also available to certain Choice-eligible customers for up to two consecutive billing periods: Includes new customers and those whose Energy Choice or aggregation contracts expire without renewal

Nature of SCO Service Opportunity to serve specific customers will be awarded: Choice-eligible SSO and existing SCO customers will be assigned to one of nine tranches ~17.7 Bcf, 135,908 residential / 12,154 non-residential customers Customers will be served under Energy Choice tariffs Full requirements obligation to provide the daily gas supply needs of Choice-eligible customers assigned as a result of the: 2/12 SCO auction and Rotating assignment of customers entering SCO service after leaving SSO or MVR commodity service Suppliers not awarded SCO tranches can elect to participate in the rotating assignment provided they have an active Energy Choice pool Suppliers who made this election after last auction are required to make another election

Nature of SCO Service (cont.) SCO pool customer load will change for various reasons, including: Weather conditions / usage equation updates Customer enrollment with an Energy Choice supplier Customer participation in an opt-out governmental aggregation Change in customer status from Choice-eligible to Choice-ineligible Termination of service Operations and fees are identical to those of the Energy Choice program Winning suppliers required to execute SCO Letter Agreement

SSO Supplier Payment Supplier payment will equal (NYMEX + Retail Price Adjustment) x Burner-tip Mcfs billed Suppliers reimbursed via wire transfer on first business day following 15th for prior month’s supply Initial payment to be made on volume supplied over the calendar month After billed volumes become known, DEO performs volumetric and financial true-up to the billed volume Objective is to ensure amounts and volumes billed exactly match amounts and volumes supplied: If volume billed < volume supplied, DEO returns excess gas and reduces the next month’s remittance accordingly (and vice-versa) Volumes to be supplied and amounts remitted to suppliers can be affected by customer rebills DEO assumes receivable risk, i.e., suppliers are paid whether DEO is paid or not, with no receivable discount

Billing Cycle Illustration Cycle 1 Cycle 2 DEO will compare calendar month supply to billing month usage to determine the monthly SSO pool imbalance Cycle 3 Cycle 4 Cycle 5 Cycle 6 Cycle 7 Cycle 8 Cycle 9 Cycle 10 Cycle 11 Cycle 12 Cycle 13 Cycle 14 Cycle 15 Cycle 16 Cycle 17 Cycle 18 Cycle 19 Cycle 20 Cycle 21 1st 31st

True-Up Example October calendar month target volume for Supplier A equals 400,000 Mcf, which it provides as requested DEO pays Supplier A for that volume on the first business day following November 15th DEO subsequently determines that the actual volume billed for the October billing month was 385,000 Mcf DEO returns the 15,000 Mcf over-supply to Supplier A prior to the October imbalance trading period that occurs in mid-November Imbalances can be traded, put in storage or cashed out DEO withholds 15,000 Mcf times the October NYMEX price plus the Retail Price Adjustment from the next payment to Supplier A

SCO Letter Agreement Winning Suppliers must sign letter agreement to confirm award Summarizes service to be rendered by supplier and DEO Shows resulting auction price and number of tranches won States Btu conversion and UFG percentage Describes the default fee required of all SCO suppliers Restates supplier’s performance obligation

Resolution of Default Risk The risk facing non-defaulting Auction suppliers has been addressed by: Requiring Default Fee financial security from Auction winners In event of default by an auction supplier, 100% of Default Fee financial security will be distributed on a weighted basis to non-defaulting suppliers Estimated Default Fee (final fees will be updated after auctions) $610,000 per tranche Limiting increase in a supplier’s SSO and/or SCO share to 50% of the load originally obtained in the auction Suppliers can voluntarily provide more DEO will conduct supplemental auction for any amounts not covered by 50% increase

Energy Choice Supplier Options Suppliers awarded tranches must accept customers into their SCO pool through the rotating assignment process Other CRNGS suppliers can elect to participate in the rotating assignment process, serving customers at the SCO rate Supplier must make one-time election by 3/15/12 to participate Supplier must maintain an active Energy Choice pool Supplier must agree to continue serving assigned customers at the SCO rate through March 2013 billing period Suppliers who elected to be SCO supplier last time must re-elect All CRNG suppliers can elect to accept customers at a Monthly Variable Rate (above provisions also apply) MVR customers can elect to move to SCO service MVR customers will not be included in next SCO auction Suppliers who elected to be a MVR supplier last time must re-elect

DEO’s Provider of Last Resort Role Supply sequence in event of default: Non-defaulting Energy Choice, SCO and SSO suppliers (voluntary) Storage inventory of defaulting supplier(s) Operational balancing inventory Incremental purchases DEO’s POLR obligation extends to the billing month after the one in which the default occurred Customer’s price in the month of default will be at its supplier’s price Will revert to SSO price in the month following the default After DEO’s two-month POLR obligation expires, customers of a defaulting supplier will revert to SSO service for up to two months Customers of a defaulting opt-out aggregation or SCO pool will be assigned to SCO supplier after second SSO bill Customers of a defaulting Energy Choice or MVR pool will be assigned to MVR supplier after second SSO bill

Operation/Supply Issues Assignment of DEO Interstate Capacity Isolated Points Delivery Point Issues Information in E-Script

Interstate Capacity Assignment All non-operational balancing upstream capacity will be released for the entire term of the auction (April 2012 to March 2013) Suppliers will be notified of available capacity once final tranche size is determined (1/25/2012) Winning bidders must take pro rata share of TETCo capacity Winning bidders and Energy Choice suppliers must take pro rata share of TGP capacity and corresponding upstream DTI capacity TGP and upstream DTI is the only capacity that follows the customer, all other releases are fixed for the 4/2012-3/2013 term Winning bidders must take pro rata share of remaining capacity Releases of remaining capacity made available to Energy Choice suppliers with > 1% market share Optional assignments become mandatory if capacity remains unreleased after the optional assignment process is complete

Interstate Capacity Assignment Capacity Changes

Interstate Capacity Assignment Estimated East Ohio capacity for One Auction Tranche:

Interstate Capacity Assignment Estimated West Ohio capacity for One Auction Tranche:

Interstate Capacity Assignment Mandatory releases of: Texas Eastern (TETCo) – 100% released to winning bidders Tennessee Gas Pipeline (TGP) and upstream DTI – 100% released to winning bidders and Energy Choice suppliers Initially optional releases of: ANR Pipeline (ANR) Dominion Transmission (DTI) (the portion not upstream of TGP) Panhandle Eastern (PEPL) and upstream Trunkline Pipeline (TRK) North Coast Gas Transmission (NCGT) and upstream Crossroads Pipeline (XRD) Columbia Transmission (TCo) and upstream Columbia Gulf (CGT) Suppliers cannot take upstream FT on TRK, XRD or CGT and/or contract storage on DTI and TCo without downstream FT capacity Accepting a release on TGP obligates shipper to serve Cochranton isolated point

Interstate Capacity Assignment Process Final estimated tranche sizes established Existing SCO suppliers have customers backed out of peak day number All suppliers and Auction customer peak days compared Pools with less then 1% peak day market share dropped Qualifying pools assigned share of capacity based on percent of total qualifying market share they hold Auction winning suppliers required to take all TETCo capacity and serve isolated TETCo points

Interstate Capacity Assignment ProcessExample Assume 6 suppliers, Auction pool:

Interstate Capacity Assignment ProcessExample Suppliers D, E and F are below 1% market share and do not get an assignment

Interstate Capacity Assignment ProcessExample Supplier A gets 20.41% of each type of capacity Supplier B gets 15.31% of each type of capacity Supplier C gets 13.26% of each type of capacity Auction pool gets 51.02% of each type of capacity Each supplier gets 1/9th (or number of winning tranches) of assigned capacity

Interstate Capacity Assignment ProcessExample ANR ETS Contract (15,000 dt/d of annual capacity)

Interstate Capacity Assignment ProcessExample Each winning auction supplier given the option to accept 850 (1/9th of 7,653) dt/d of ANR ETS E-mails sent to all qualified suppliers and registered bidders showing: Amount of capacity assigned Applicable discounted capacity rates Non-registered Auction bidders must execute Confidentiality Agreement to receive negotiated capacity information Suppliers with the option to elect capacity must inform DEO of capacity they do not want by date in e-mail (will be prior to auction)

Interstate Capacity Assignment ProcessExample Winning Auction bidders given first option to accept any capacity returned after auction Any unclaimed capacity will then be posted to all shippers on DEO’s system via DEO’s E-Script EBB Unreleased ANR capacity can only be claimed by another ECPS/SSO supplier Any capacity not accepted by posted deadline will then revert to original supplier who initially rejected capacity Only ANR ETS comes with corresponding Firm Receipt Space at West Ohio - Convoy (temperature sensitive) All releases will be done prior to their start date If supplier wants capacity released to an agent, supplier and agent must execute Three Party Agent Agreement

Isolated Points DEO has two market areas that must receive specific supply Powhattan and Woodsfield (via TETCo) Cochranton (via DTI from TGP) If supplier receives a release of TETCo and/or TGP (plus corresponding DTI) they must serve these markets Targets are posted with the daily Energy Choice/SSO targets Total target INCLUDES these volumes Refer to Attachment 8

Delivery Points For the winter, Receipt Space assigned at TGP should be scheduled to TGP Gilmore Meter. Operational issues may require DEO to request a change to the TGP Petersburg Meter. Does not include TGP Carroll County Firm Receipt Space Receipt Space assigned for TETCo interconnect can be used to schedule deliveries from TETCo and/or Rockies Express (REX) REX deliveries subject to rules posted in E-Script REX now available to daily balanced pools, including SSO, SCO and Energy Choice

Info Postings in E-Script DEO posts auction and other critical information to E-Script Make sure your E-Script users relay information to appropriate contact DEO will send information to ONE company contact only Supplier’s responsibility to distribute or use group e-mail Supplier’s E-Script users can set up Event Notification in E-Script to have all postings emailed

Contacts For more information contact: Tony Sanabria 216-736-5558 anthony.m.sanabria@dom.com

Dominion East Ohio Auction Information Meeting

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