1999 Mastio Natural Gas Pipeline Survey

1. 1999 Mastio Natural Gas Pipeline Survey Results for Northern Natural Gas March 30, 2000

2. Mastio Index Rankings for Interstate Pipelines* High Score 100 • The industry mean increased 2.2% from 1998 to 1999 • Northern’s average score improved 4.8% 90 80 70 60 NBPL TW NNG FGT All others Northern’s overall ranking increased significantly, from 33rd out of 46 to 20th out of 50. An increase of 13 positions. 50 40 30 20 10 Low Score 0 *Includes all 50 interstate pipelines surveyed

3. Mastio Index The Mastio Index is a composite of the overall service, overall performance, overall preference and the 40 customer service attributes measured, weighted by the customer needs as defined by all 1,257 customers surveyed. The overall scores are converted to a 100 point scale with a higher score being preferable. “Overall service” 25% “Overall pipeline company performance” 25% “Rank in order of preference” 25% Need weighted composite of the 40 attributes 25% 100%

4. Glossary of Terms • Mean - The average score of the information extracted from the number of respondents - thus, the mean can vary depending upon the data extracted • Industry group - Industry respondents • Focus Group - Customer list NNG provided Mastio • Industry mean - The average score from all 1,257 industry respondents • Focus Group mean - The average score from all 26 focus group respondents • Commercial - Marketing • Commercial support - Market services • Attributes - Mastio provided statements ranked by respondents on a scale of 1 to 5 • Score/Rating System - The respondents used a scoring system of 1 to 5 Rating Scale 1=Excellent 4=Below Average 2=Good 5=Poor 3=Average

5. Attributes The 15 most important attributes ranked by all industry respondents in 1998 1. Transportation pricing is competitive 2. Dependability in agreements and commitments 3. Timely notification before initiating restrictions 4. Accuracy in scheduled gas volumes 5. Accurate measurement of volumes 6. Reliability of primary firm gas transportation 7. Gas metering systems that are accurate 8. Ability to negotiate discounts 9. Attitude of continuous improvement 10. Reps who listen well 11. Availability of capacity 12. Simple and straightforward scheduling 13. Responsive sales and service personnel 14. Pipeline understands your needs and requirements 15. Real-time pipeline operations information New Attributes added in 1999 and not yet ranked by the industry 1. Trustworthiness of pipelines 2. Internet/EBB access to pipeline information

6. NNG FOCUS GROUP

7. Customers in NNG Focus Group NSP, Nicor, Wisconsin Gas, and Oxy were part of the NNG focus group, but they did not respond to the survey. Those customers make up 11.27%, 3.37%, 2.98%, and .41% of NNG’s revenue respectively.

8. Customer Focus Group (cont’d) • The following focus group customers were identified based on available data: Cibola Utilicorp MUD U.S. Energy Minnegasco Kaztex Pan Alberta Superior W&L MidAm Duke (Mobil) Tenaska Farmland Wepco IMC Nitrogen GPM Pan Alberta

9. Customer Focus Group (cont’d) • Customers planning to switch pipelines within the next two years • Superior W&L - “For better reliability. We need a second tap, and a better price.” • Wepco • Wisconsin P&L (Alliant) • MidAmerican - “We renegotiate a portion of our transportation services every year.”

10. Northern Natural Gas Areas of Strength & Areas Needing Improvement* Areas of Strength Areas Needing Improvement** • Simple and straightforward scheduling • NNG - 2.90 • Mean - 2.44 • Gas pooling and aggregation services • NNG - 2.88 • Mean - 2.47 • Accurate measurement of volumes • NNG - 2.40 • Mean - 2.03 • Accuracy in scheduled gas volumes • NNG - 2.20 • Mean - 1.87 • Trustworthiness of pipeline • NNG - 2.43 • Mean - 2.15 • Internet/EBB access to pipeline information • Use of electronic bulletin boards • Ability to negotiate discounts • Access to diverse supply • Responsive sales and service personnel * This is a list of NNG’s top 5 strengths and the 5 areas that need to see the most improvement. It is based on an average of all 40 attributes rated by NNG’s Focus Group. ** Even though these are below the mean, NNG received a slightly above average to good rating.

11. COMPETITION

12. Overall Performance ScoresIndustry Group Pipeline Mean ANR NGPL PEPL KN NNG Overall Performance 2.23 2.22 2.22 2.17 2.31 2.90 25% Overall Preference 25% 2.95 2.68 3.05 2.64 3.18 3.15 Overall Service 25% 2.24 2.21 2.21 2.16 2.32 2.94 Needs Weighted Composite of 40 Attributes 25% 2.24 2.30 2.25 2.20 2.34 2.78 2.42 2.35 2.43 2.29 2.54 2.94 Average 2 3 1 4 5 Ranking

13. ACTION PLAN

14. 1. Measurement accuracy 2. Uncertainty of scheduled volumes 3. Complexity of gas scheduling 1. Current Continuous Improvement Project focusing on measurement. Develop a measurement strategy to fit current and future business needs. Evaluate organizational structure to reflect the measurement strategy. 2. Evaluate the feasibility of billing on scheduled. EPSQ validation in nomination. (11/99) E-mail cut notices. (10/99) 3. Evaluate if scheduling process can be simplified without compromising the diversity of NNG’s pricing and services e.g. proposed Carlton Resolution. Market Service Reps take the initiative to train customer’s new staff as they transition into the scheduling position. NNG Action Plan Item Action

15. 4. Pooling services 5. Trustworthiness of pipeline 6. General 4. MID 17 Pool, Bushton Pool, and Demarcation Pool were implemented after when the Mastio survey was completed. 5. Marketing will implement a scorecard with top revenue customers e.g. defining what is customer service. Pre-approve parameters for Marketing to negotiate with customers. Increase the speed of the approval process for negotiating deals with customers. 6. Marketing reorganization efforts to split out customer teams. Follow-up on Mercer? NNG Action Plan (cont’d) Item Action

16. 7. Mastio Study 7. Follow up with Mastio on our feedback for enhancements for 2000 survey: Weight of the 40 attributes and overall questions. Further clarifications of attribute questions e.g. “Trustworthiness of pipeline”. Industry respondents re-rank attribute questions in order of importance for 2000. NNG Action Plan (cont’d) Item Action