ARIZONA CORPORATION COMMISSION

NATURAL GAS FORUM SEPTEMBER 8, 2005CITY OF MESA UTILITIES

DEPARTMENT

FRANK McRAERESOURCES DIVISION DIRECTOR

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DESCRIPTION OF MESA AND ITS UTILITIES DEPARTMENT

3RD largest city in Arizona40th largest city in countryApproximately 128 square milesPopulation of 450,000Forecast 650,000 by 2020.  Utilities Department Electric Natural Gas Water Wastewater utilities.

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DESCRIPTION OF MESA’S NATURAL GAS UTILITY

SYSTEMUtilities Department Gas Division Utilities Services & Information Services Resources Division

Customer ServiceDevelopment ServicesMayor/Council adopt utility rates and fees by ordinanceRates and tariffs are normally adjusted during the budget process to allow for changes in utility and general government revenue requirementsMonthly fuel cost adjustments

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DESCRIPTION OF MESA’S NATURAL GAS UTILITY

SYSTEM

13th largest publicly owned natural gas systemFY 2004/05 revenues of $35 million (6.30.05)43,000 residential and 2,500 commercial customersMay to October - average and peak day usage was 5,202 and 8,557 dekatherms respectivelyNovember to April - average and peak day usage was 10,611 and 18,587 dekatherms respectively.

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DESCRIPTION OF MESA’S NATURAL GAS UTILITY

SYSTEM

Service area encompasses approximately 90 square miles within the City’s 128 square mile boundaries. Southwest Gas serves remainder within city limits

City also provides utility services to the Magma service area Approximately 6,400 customers Growth - 3,500-4,000 customers per year 236 square miles, SE of City, Pinal County Not contiguous with the natural gas distribution

system within the city limits

  

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NATURAL GAS SUPPLIESCompetitive Solicitation – Spring 2005 Coral Energy Resources, LP

Initial term 9.30.06 Two, one-year extensions thereafter at Mesa’s option

Qualified other suppliers Entered into master agreements to supplement Coral

San Juan & Permian Basins Transportation via EPNG

Market Volatility Significant, sometimes immediate, reaction to slightest

changes in fundamentals that raise prices Non-symmetrical response to changes in fundamentals

that lower prices

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NATURAL GAS SUPPLIESIssue solicitation late September / early October Supplement Coral contract Sellers pre-qualified – Spring 2005

Competitive Solicitation

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CUSTOMER AWARENESS & EDUCATION

Utilities Department is launching a campaign to educate customers about higher natural gas prices Communications are in draft stage

Primary messages: Mesa utility customers should expect higher gas bills this

winter Mesa is taking steps to keep costs as low as possible Conservation can help ease the burden

WHY? Natural gas prices continue to climb in response to a variety of natural gas market forces.

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CUSTOMER AWARENESS & EDUCATION

WHY? (continued)Costs of natural gas – direct pass through Rising market prices mean customers pay more No mark-up or additional revenue to City budget

WHAT?

Encourage customers/citizens to take steps now to ease the bill increase once colder temperatures hit

Provide tips for conserving energy

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CUSTOMER AWARENESS & EDUCATION

HOW? Deliver messages to media City Manager’s Monthly Update News Releases

Direct Communication to Customers FAQs on www.cityofmesa.org Message in Openline, the City’s utility bill newsletter Mesa Channel 11 announcements Community newsletters Customer Service Inquiries City Council presentation

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ASSISTANCE PROGRAMS

The Mesa Community Action Program (CAP) service area encompasses the City of Mesa and the unincorporated areas between the City limits and the Pinal County border. Mesa CAP receives Federal and State funding for utility assistance programs.

The Mesa CAP contracts with Mesa Community Action Network (Mesa CAN) to administer programs for customers in need, including:

Utility Repair and Replacement Weatherization Utility payment assistance Reduced energy burden for qualifying households

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ASSISTANCE PROGRAMSMesa’s Customer Service Section refers customers to the following agencies: Mesa CAN Salvation Army Department of Economic Security Community Resource & Referral SW Human Development - Children & Families Seniors & Adults with Disabilities St. Vincent de Paul

Mesa gas customers in the Magma Service Area (Queen Creek/Pinal County) only can receive assistance from Chandler CAP.

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BILLING OPTIONS

The City of Mesa currently does not offer alternative billing options. Annualized bill averaging is under consideration but will not likely be implemented before this winter.

Once offered, the new program will be advertised via the Web site, OpenLine, News releases, Mesa Channel 11 and word of mouth.