Florida Gas Utility 2016 Annual Meeting

1. FLORIDA GAS UTILITY2016 ANNUAL MEETINGJune 8-9, 2016Clearwater Beach, Florida Elizabeth Zembruski 1730 Rhode Island Avenue, N.W. Suite 600 Washington, D.C. 20036-3116 (202) 429-8800 ezembruski@jhenergy.com www.jhenergy.com

2. FERC Leadership Update • Two of the Five Chairs will be Vacant Post-June 2016 • Chairman Norman Bay (D) • Commissioner Cheryl LaFleur (D) • Commissioner Colette Honorable (D) • Commissioner Tony Clark (R) is leaving FERC when his term expires on June 30, 2016 • Former Commissioner Philip Moeller (R) left FERC in June 2015

3. FGT UPDATE • NGA Section 4 Rate Case (Docket No. RP15-101) • FGT filed a Section 4 rate case with FERC on October 31, 2014. • In November 2014, FERC accepted and suspended the filing, 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. • FERC rejected the following tariff changes proposed by FGT in an “Order on Technical Conference” issued in June 2015: • Daily Scheduling/Tolerances; • Pathing of Nominations; • Point-Based and Hourly-Based Alert Day provision; • Alert Day Notice provision; • Execution of Form of Service Agreements (GT&C Section 20.D); • SFTS conversion right language (Rate Schedule SFTS, Paragraphs 1.e.2 and 11.A); and • Cash-out calculation.

4. FGT UPDATE • NGA Section 4 Rate Case (Docket No. RP15-101) • Rate case settlement among FGT, shippers and FERC staff approved by FERC on December 4, 2015. • Key rate case settlement terms: • Settlement became effective on February 1, 2016. • Period I Settlement Rates took effect February 1, 2016. • Lower Period II Settlement Rates take effect on February 1, 2019. • FTS-1 and FTS-2 rates were rolled in. • FGT is required to meet with its shippers to discuss changes to its rules governing pooling structure, segmentation, and flow day diversions by August 1, 2016. If FGT and its shippers cannot reach agreement on such changes, shippers are free to file NGA Section 5 complaints on these issues after February 1, 2017. • FGT held this meeting with customers in May 2016. • FGT must file its next general Section 4 rate case on February 1, 2021.

5. FGT UPDATE • Jacksonville Expansion Project (Docket No. CP15-144) • On March 30, 2016, FERC issued FGT a certificate authorizing the construction of the Jacksonville Expansion Project. • The project involves the construction of pipeline loops and compression modifications in Suwanee, Bradford, Columbia and Clay Counties. • It will provide 15,000 MMBtu/day of firm transportation to two existing delivery points on the Jacksonville Lateral. • FGT has entered into a Precedent Agreement with Peoples. • FGT has not yet commenced construction of the project. • St. Petersburg Lateral Relocation Project (Docket No. CP16-2) • In October 2015, FGT filed a prior notice request under its blanket certificate for authorization relocate a small amount of pipeline in Pinellas County due to a Florida DOT road project. • Construction commenced in January 2016 and is almost completed.

6. OTHER FLORIDA-RELATED PROJECT DEVELOPMENTS • Florida Southeast Connection (Docket No. CP14-554), Transco’s Hillabee Expansion Project (Docket No. CP15-16) and Sabal Trail (Docket No. CP15-17) • In an order issued on February 2, 2016, FERC issued certificates authorizing the construction of these three projects: • FSC is a new 126-mile pipeline which 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 will abandon the 1,131,730 Dth/day of capacity created by the Hillabee Expansion Project by lease to Sabal Trail. • Sabal Trail, a new 500-mile pipeline, will transport 1,075,000 Dth/day of natural gas to Florida to serve foundation shippers FPL and DEF. • Environmental groups and landowners filed a request for rehearing and stay. • FERC denied the stay in March 2016, but has not yet issued an order on the request for rehearing. • In the meantime, FERC has authorized FSC, Transco and Sabal Trail to commence pre-construction activities.

7. OTHER FLORIDA-RELATED PROJECT DEVELOPMENTS • Elba Express’ EEC Modification Project (Docket No. CP14-115) • On June 1, 2016, FERC issued Elba Express a certificate authorizing the construction of the EEC Modification Project which will add north-to-south transportation capacity to its system. • FERC also authorized Elba Liquefaction Project to construct and site natural gas liquefaction and export facilities at Southern LNG’s existing LNG terminal in Georgia. • The EEC Modification Project will help Elba Express transport domestically produced natural gas on a firm basis to 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) • On June 1, 2016, FERC also granted Southern Natural a certificate authorizing the construction of the Zone 3 Expansion Project. • 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.

8. FERC NATURAL GAS-ELECTRIC COORDINATION EFFORTS • Coordination of Scheduling Processes (Docket No. RM14-2) • Interstate natural gas pipelines were required to comply with Version 3.0 of the NAESB WGQ Standards on April 1, 2016. • The deadline for submitting nominations in the Timely Nomination Cycle was moved from 11:30 a.m. CCT to 1:00 p.m. CCT. • The number of intraday nomination cycles increased from 2 to 3. • A “no bump” cycle was retained. • Computerized Scheduling • In Order No. 809, FERC requested that the electric and natural gas industries, through NAESB, explore the potential for faster, computerized scheduling when shippers and confirming parties all submit electronic nominations and confirmations, including a streamlined confirmation process if necessary. • FERC has asked NAESB to file such standards or a report on the development of such standards by October 17, 2016.

9. OIL AND LIQUIDS DEVELOPMENTS • FERC 5-Year Review of Indexing (Docket No. RM15-20) • In December 2015, FERC established a new index level to calculate annual changes for interstate oil pipeline rate ceilings for the 5-year period from July 1, 2016 through June 30, 2021. • FERC set the new index level of Producer Price Index for Finished Goods plus 1.23 percent (PPI-FG+1.23) for the five-year period beginning July 1, 2016. The prior index level was PPI-FG+2.65. • Application of the new index ceiling for the July 1, 2016 through June 30, 2016 period results in a rate reduction of about 2%. • Crude Oil Export Ban Lifted • The 40-year ban on the export of domestically-produced crude oil from the U.S. was lifted in December 2015 as part of the budget deal.

10. ELECTRIC DEVELOPMENTS • FERC’s Order No. 745 • In Order No. 745, FERC found that demand response providers in organized wholesale markets (RTOs/ISOs) must be compensated for reducing electricity load at the same rates as if they met that demand with generated electricity.  • Legal challenges were filed by generators. • In January 2016, the Supreme Court overturned a D.C. Circuit ruling which had vacated FERC’s Order No. 745. • The Supreme Court affirmed FERC’s role in regulating demand response resources in organized wholesale markets. • EPA’s Clean Power Plan • The CPP was issued by the EPA in August 2015. • It establishes state-by-state targets for carbon emissions reductions. • Legal challenges were filed by states, industry groups and businesses. • The Supreme Court stayed implementation of the CPP pending judicial review in February 2016. • In May 2016, the D.C. Circuit announced it would hear the case en banc. Oral arguments are scheduled for the end of September 2016.

11. FERC ENFORCEMENT • BP (Docket No. IN13-15) • In August 2013, FERC issued an order to show cause alleging that BP manipulated the next-day, fixed-price natural gas market at Houston Ship Channel (HSC) from mid-September 2008 to November 2008. • FERC ordered BP to show cause why it should not pay a $28 million civil penalty and disgorge $800,000 plus interest. • A hearing was held before an ALJ in March and April 2015. • In an Initial Decision issued in August 2015, the ALJ found that BP violated FERC’s anti-manipulation rule in 18 C.F.R. § 1c.1 and the market manipulation prohibition in Section 4A of the NGA. • The full FERC must still issue an order on the Initial Decision.

12. LEGISLATIVE DEVELOPMENTS • Comprehensive Energy Bill • The House passed the “North American Energy Security and Infrastructure Act” (H.R. 8) in December 2015 by a partisan vote of 249-174. • Expedited action on LNG export applications by DOE; • Expedited review of interstate natural gas pipelines by FERC; and • Expedited permitting of cross-border projects like Keystone XL. • The Senate passed the “Energy Policy Modernization Act” (S. 2012) in April 2016 by a bi-partisan vote of 85-12. • Expedited action on LNG export applications by DOE; and • Streamline the approval process for electric transmission lines. • The House and Senate versions of the bill must be reconciled in a conference committee which is expected to convene in June 2016. • The White House has previously threatened to veto some provisions in the House version of the bill.