Presented by: Ron Edelstein Pennsylvania Public Utility Commission November 2, 2000

1. Pennsylvania Gas Consumer R&D Presented by: Ron Edelstein Pennsylvania Public Utility Commission November 2, 2000

2. Topics • Why now? • GTI Strategy • Gas Consumer Benefits R&D “Mutual Funds” • Gas Consumer Benefits Summary • Summary of Results to Date • State Summary Map • New Issues • Discussion

3. Why now? • Energy industry restructuring • Energy price increases • Increased need for and interest in end-use equipment efficiency • Pipeline integrity concerns • Environmental issues

4. GTI Strategy • Work with LDC’s in primary states to help them request PUC approval for gas consumer benefits R&D cost recovery • Obtain commitments from each LDC on specific R&D options • Deliver results to our LDC and gas ratepayer customers

5. 2001 Gas Consumer Benefits R&D Mutual Funds (with Sample Projects) • Residential/Commercial (R/C) Codes & Standards • NAECA furnace rulemaking • Manufactured housing • Increased Efficiency R/C Technology • Modulating, mid-efficiency residential furnace • Residential distributed generation and cogeneration • “Smart” residential appliances • Increased efficiency and productivity C cooking equipment • R/C Customer Gas Cooling Solutions • Building cooling, heating, and power • Product development and field tests of advanced gas cooling equipment

6. Mutual Funds - Cont. (with sample projects) • Distributed Generation Opportunities • Distributed generation controls • Assessments of fuel cell and microturbine developments • Increased-Efficiency Industrial Technology • Infrared heating • Oscillating combustion • Operations Technology Choices • Excavation/restoration • Pipe location/leak pinpointing • No-dig technologies

7. Mutual Funds - Cont. (with sample projects) • Emerging Technologies (research and tech development) • High-pressure liners • Advanced absorption cooling • Gas Forecasting & Planning • Commercial customer load forecasting • Manufactured Gas Plant Cleanup Research • Remediation and cleanup techniques • Bioremediation

8. Gas Consumer Benefits Summary First Order Benefits • Increased-efficiency equipment for all sectors • Lower consumer first costs and energy bills • Lower gas transmission and distribution O&M costs • Lowered environmental cleanup costs Second Order Benefits • Increased competitiveness for Pennsylvania’s Industry • Enhanced environmental quality • Reduced peak electric demand

9. Summary of Results to Date • Eleven state Public Utility Commissions have approved the recovery of gas consumer interest R&D • MS, AL, FL, WY, ID, WA: Purchased Gas Adjustment (PGA) • KY: “Tariff rider” • NC: O&M Expense in a deferred account • NY: “Tariff leaves,” deferred accounting • UT, IL: Approved in base rates

10. State Summary Map (as of 10/30/00) 1.Company and Regulatory Approval 5. Low Probability 2. Company Yes, Reg. Pending 6. No Significant Activity 3. Significant Activity, Co. considering filing 4. Medium Probability Intrastate Companies Note: Dots are Atmos states

11. New Issues • Tie in between pipeline integrity and need for cofunding for the states to obtain DOE funding • As a compromise position: • Purchased gas adjustment as an interim step only, GTI in base rates after 2004, or • Include in transportation tariff sheets • Need for gas consumer interest R&D as energy prices increase and to address pipeline safety and environmental concerns

12. Discussion