FLORIDA GAS UTILITY 2015 ANNUAL MEETING June 3-5, 2015 St. Augustine, Florida

1. FLORIDA GAS UTILITY2015 ANNUAL MEETINGJune 3-5, 2015St. Augustine, Florida DOUG JOHN JOHN & HENGERER 1730 RHODE ISLAND AVENUE, N.W. SUITE 600 WASHINGTON, D.C. 20036-3116 (202) 429-8801 djohn@jhenergy.com

3. FERC Update • FERC Leadership Changes • Cheryl LaFleur (D) was the Acting Chairman for a 9-month period which ended on April 14, 2015. • Norman Bay (D), the former Director of the Office of Enforcement, became FERC Chairman on April 15, 2015. • Commissioner Phillip Moeller (R) recently announced plans to leave FERC when his term expires on June 30, 2015. • Patrick McCormick, senior counsel for the Senate Energy and Natural Resources Committee, is reportedly Commissioner Moeller’s likely replacement.

4. FGT UPDATE • NGA Section 4 Rate Case (Docket No. RP15-101) • FGT filed a Section 4 rate case with FERC on October 31, 2014, as required by the settlement in its last rate case. • FGT alleged a system-wide overall cost-of-service of approximately $940 million which represented an increase of approximately $434 million or 46% over the cost-of-service established in the settlement in FGT’s last rate case, most of which related to new FTS-3 service. • FGT proposed to roll-in Rate Schedule FTS-2 into Rate Schedule FTS-1. • FGT proposed a number of non-rate tariff changes, including, among other things: new daily scheduling penalties, changes to its Alert Day provisions, the establishment of a maximum hourly entitlement at secondary points, and pathing in the Market Area. • On November 28, 2014, FERC accepted and suspended FGT’s filing to be effective May 1, 2015, subject to refund and the outcome of a technical conference and a hearing. • Rate issues were set for hearing. • Non-rate issues such as tariff changes were set for technical conference.

5. FGT UPDATE • NGA Section 4 Rate Case (Docket No. RP15-101) • A technical conference on non-rate issues was held by FERC staff on February 5, 2015. The parties subsequently filed post-technical conference comments. • The first settlement conference on rate issues was held April 20-21, 2015. • In order to give themselves time to work towards a settlement on all rate and tariff issues before the order on technical conference issues was issued by FERC, on April 22, 2015, FGT, FERC Staff and the active participants asked FERC to hold in abeyance the issuance of an order on the technical conference issues. • On April 23, 2015, FERC granted that request. • Settlement conferences were held May 18-19, 2015 and May 26-27, 2015. • On May 28, 2015, FGT, FERC Staff and the active participants asked FERC to issue an order on the technical conference issues ASAP to permit FGT to be in a position to move the suspended tariff provisions into effect no later than July 1, 2015. • A further settlement effort may be mounted in June.

6. FGT UPDATE • Pompano Compressor Station 2.15 Project (Docket No. CP14-21) • The project involves a new electric 22,000 hp compressor station and related facilities in Broward County. • It will provide an additional 25,000 MMBtu/day to FPL. • FERC issued the certificate order in October 2014. • Construction commenced in November 2014. • The project was partially placed into service in March 2015. • Jacksonville Expansion Project (Docket No. CP15-144) • FGT filed a certificate application in March 2015. • The project involves the construction of two pipeline loops and compression modifications in Suwanee, Bradford, Columbia and Clay Counties. • It will provide an initial 60,000 MMBtu/day, and an expansion of 15,000 MMBtu/day of firm transportation to two existing delivery points for Peoples. • FERC issued a notice of its intent to prepare an EA for the project on May 19, 2015.

7. OTHER FLORIDA-RELATED PROJECT DEVELOPMENTS • Florida Southeast Connection (Docket No. CP14-554) • FSC filed a certificate application with FERC in September 2014. • The 126-mile pipeline will transport 600,000 Dth/day from an interconnection with Sabal Trail near Intersection, Florida to FPL’s Martin Clean Energy Center near Indiantown, Florida. • Transco’s Hillabee Expansion Project (Docket No. CP15-16) • Transco filed a certificate application with FERC in November 2014. • The project will involve pipeline looping facilities and compression in Alabama. • Transco will abandon the 1,131,730 Dth/day project capacity by lease to Sabal Trail. • Sabal Trail (Docket No. CP15-17) • Sabal Trail filed a certificate application with FERC in November 2014. • The new 500-mile pipeline will transport 1,100,000 Dth/day of natural gas to Florida to serve foundation shippers FPL and DEF. • Sabal Trail will also lease the Hillabee Expansion Project capacity from Transco. • Environmental Review • FERC will review these three projects together. The Final EIS should be issued on or about November 20, 2015. The 90-day Federal authorization decision deadline would be February 18, 2016. • Projected In-Service Date: May 2017

8. OTHER FLORIDA-RELATED PROJECT DEVELOPMENTS • Elba Express’ EEC Modification Project (Docket No. CP14-115) • Elba Express filed a certificate application for the EEC Modification Project in March 2014. • The project will add north-to-south transportation capacity to the Elba Express system. • It will help Elba Express transport domestically produced natural gas on a firm basis to the proposed Elba Liquefaction Project for export from the U.S. and other points of delivery. • Southern Natural’s Zone 3 Expansion Project (Docket No. CP14-493) • Southern Natural filed a certificate application for the Zone 3 Expansion Project in May 2014. • The project will create an additional 235 MMcf/day of firm capacity and provide access to natural gas entering its system through interconnections with Elba Express. • Eagle LNG (Docket No. PF15-7) • In December 2014, FERC approved Eagle LNG’s request to use the NEPA pre-filing process for its proposed Jacksonville Project on the St. John’s River in Jacksonville, Florida. • The project would receive and liquefy natural gas, temporarily store the produced LNG, and load LNG into trucks and containers, or onto ocean-going vessels for use in the marine bunkering trade and for export from the U.S.

10. FERC NATURAL GAS-ELECTRIC COORDINATION EFFORTS • Coordination of Scheduling Processes (Docket No. RM14-2) • In April 2015, FERC issued a Final Rule that revised its regulations to better coordinate the scheduling of wholesale natural gas and electricity markets. • FERC did not adopt its proposal to move the start of the Gas Day from 9:00 a.m. CCT to 4:00 a.m. CCT. • FERC adopted its proposal to move the deadline for submitting nominations in the Timely Nomination Cycle from 11:30 a.m. CCT to 1:00 p.m. CCT. • FERC adopted a NAESB proposal to increase the number of intraday nomination cycles from 2 to 3 and retained a “no bump” cycle. • FERC required an interstate pipeline to allow multiple shippers associated with a designated agent or asset manager to be jointly and severally liable under a single firm transportation service agreement upon shipper request. • Interstate natural gas pipelines must comply with the revised NAESB standards that are incorporated by reference in the Final Rule beginning on April 1, 2016. • Each interstate natural gas pipeline must file tariff records to reflect the revised NAESB standards by February 1, 2016.

11. FERC NATURAL GAS FACILITY MODERNIZATION EFFORTS • Coordination of Scheduling Processes (Docket No. PL15-1) • In April 2015, FERC issued a Policy Statement to provide greater certainty regarding the ability of interstate natural gas pipelines to recover the costs of modernizing their facilities and infrastructure. • FERC will evaluate a pipeline’s proposal for a modernization cost surcharge pursuant to the following five guiding standards: • The pipeline’s base rates must have been recently reviewed through a Section 4 rate case proceeding, a cost and revenue study, or through a collaborative effort between the pipeline and its customers; • Eligible costs must generally be limited to one-time capital costs incurred to meet safety or environmental regulations or other capital costs shown to be necessary for the safe, reliable, and/or efficient operation of the pipeline, and the pipeline must specifically identify each capital investment to be recovered by the surcharge; • Captive customers must be protected from cost shifts if the pipeline loses shippers or increases discounts to retain business; • The pipeline must include some method to allow a periodic FERC review to ensure rates remain just and reasonable; and • The pipeline must work collaboratively with shippers to seek their support for any surcharge proposal.

12. OIL AND LIQUIDS DEVELOPMENTS • Increased Oil and Liquids Pipeline Activity at FERC • A large number of petitions for a declaratory order asking FERC to approve the rate structure and terms of service for new pipelines or expansions continue to be filed. • In April 2015, the Liquids Shippers Group, Airlines for America and the National Propane Gas Association filed a Petition for Rulemaking which asks FERC to issue a NOPR in which it proposes to revise Page 700 of the Form No. 6 annual report to further enhance crude oil and petroleum product pipeline financial reporting transparency (Docket No. RM15-19). • Exports of Crude Oil and Condensate from the U.S. • The Commerce Department has authorized companies to export lightly processed crude known as condensate. • Bills have been introduced in both the Senate and House to lift the 40-year ban on the export of domestically-produced crude oil from the U.S.

13. LNG DEVELOPMENTS • DOE/FE Change to its LNG Export Decision-Making Procedures • In August 2014, DOE/FE adopted revised procedures under which it will act on applications to export LNG from the Lower-48 to Non-FTA countries only after the review required by NEPA has been completed. • A large number of applications to export LNG to FTA and Non-FTA countries continue to be filed with DOE/FE. • FERC Authorization for Liquefaction Facilities at LNG Terminals • 5 LNG export terminals have received FERC authorization and are under construction: Cheniere/Sabine Pass LNG, Cheniere/Corpus Christi, Sempra/Cameron LNG, Freeport LNG, and Cove Point LNG. • There are 13 proposed LNG export terminals pending at FERC, including the Elba Liquefaction Project. • FERC has faced increased criticism from activists – including demonstrators at FERC headquarters – who oppose natural gas infrastructure projects, including LNG export terminals, as well as fracking. • Chairman Bay has personally taken an aggressive stance on asserting FERC jurisdiction over LNG facilities traditionally viewed as non-jurisdictional.

14. ELECTRIC DEVELOPMENTS • Order No. 745 • In May 2014, the D.C. Circuit, by 2-1 vote, overturned Order No. 745, the final rule which required that demand response resources receive comparable compensation to generation in wholesale energy markets. The D.C. Circuit viewed this area as one reserved to the states to regulate. • In May 2015, the U.S. Supreme Court announced that it will hear an appeal of the D.C. Circuit ruling which vacated Order No. 745. • Projects Stymied by Low Prices and Lack of Investment • Project sponsors have found it difficult to obtain financing for expensive and non-traditional projects such as the Cape Wind offshore wind project and the Tres Amigos super-hub for renewable energy in New Mexico. • FERC Response to EPA’s “Clean Power Plan” • FERC is considering whether – as the reliability overseer for the nationwide electric grid – it can and should take action to influence the implementation of EPA’s Clean Power Plan for emission reductions.

15. FERC ENFORCEMENT • BP (Docket No. IN13-15) • FERC alleges that BP manipulated the next-day, fixed-price natural gas market at Houston Ship Channel from September through November 30, 2008. FERC has proposed a civil penalty of $28 million. • A hearing was held before Judge Cintron in late March/early April 2015. • Barclays (Docket No. IN08-8) • Barclays continues to fight a civil penalty of $435 million and disgorgement of $34.9 million in profits assessed by FERC for alleged market manipulation in Western power markets in U.S. District Court in California. • In May 2015, a U.S. District Court judge rejected Barclays’ attempt to dismiss the case.