Fall 2010 Pennsylvania Customer Newsletter

It’s not too soon to start thinking about the winter heating season.

Natural Gas Price Outlook

Delivery Service Charges

Gas Supply Charges

www.nationalfuelgas.com

For more information, including translation services, call 1-800-365-3234. Este folleto también es disponible en español. Para más información, llame al 1-800-365-3234.

PA Fall Newsletter 10-10

Gas Supply Charges make up more than half of a typical home-heating bill and reflect the market price of the gas that you use, the pipeline and storage costs associated with the gas purchases we make for our customers, and any adjustments for the over or under collection of purchased gas costs from previous years. These adjustments help us ensure that the Utility only collects the exact amount of money for gas that is purchased for our customers, since National Fuel cannot make a profit on that gas, by law.

Last year’s Gas Supply Charges included adjustments that refunded the over collection of purchased gas costs to customers. The majority of these refunds will expire by the upcoming winter heating season, which is the main reason why gas supply charges on customer bills are expected to be higher this winter.

Lower natural gas prices partially offset these expiring refunds. September 2010’s gas prices were the lowest they have been in the past 12 months and they were more than 40 percent lower than the average gas price over the last three years, according to settlement prices on the New York Mercantile Exchange. Gas Supply Charges are passed on to our customers dollar for dollar without a mark-up or discount.

The majority of your home heating bill is determined by two main factors: the price of each unit of natural gas and the amount of gas you use. The price of each unit of gas that you use includes Gas Supply Charges and Delivery Service Charges. By law, National Fuel cannot make a profit on gas that is purchased and then sold to its customers. The price the Utility pays for gas is determined by market forces and is passed on to customers through Gas Supply Charges. Delivery Service Charges reflect our cost of service. These charges are regulated and cannot be increased without state approval.

Colder winter weather causes natural gas use to go up, creating higher heating bills. If the upcoming winter is colder, customers may use more gas to heat their homes, which may increase their heating bills.

National Fuel’s Delivery Service Charges, or the cost of delivering safe, reliable natural gas to you, represent the Utility’s cost of doing business. Some of these costs include staffing, offices, equipment, pipeline maintenance, taxes and interest costs primarily for infrastructure financing. Delivery Service Charges are regulated by and are ultimately determined by the Pennsylvania Public Utility Commission, ensuring that established rates are just and reasonable. In fact, when comparing average residential customer bills with other gas utilities, National Fuel has consistently provided its customers with the lowest or one of the lowest bills in Pennsylvania. Our employees continuously work hard to keep operating costs down so that gas bills remain low for our customers.

Components of an Average Residential Bill in January Based on Normal Weather Conditions

January 2001

$350

$300

$250

$200

$150

$100

$50

$0January 2002

January 2003

January 2004

January 2005

January 2006

January 2007

January 2008

January 2009

January 2010

Delivery Service Charges Gas Supply Charges

Important Contact InformationBilling Questions and Customer ServiceIf you have a question, problem or request, please call us Monday through Friday, 7 a.m. to 6 p.m.

Erie area: 814-871-8200 All other areas: 1-800-365-3234 Or visit www.nationalfuelgas.com for more information.

Customers with hearing or speech difficulties are able to communicate with us on electronic display (TTY or teletypewriter) and can have a relay call placed to us by calling 7-1-1.

Customer Assistance CentersIf it is necessary for you to talk with one of our representatives in person, our Customer Assistance Centers are staffed with helpful people who can assist you. Please check the locations listed below to find the office closest to you.

Open Monday through Friday, 8:30 a.m. to 4:30 p.m.

Erie: 1100 State Street, Erie, PA 16501

Oil City: 1 Relief Street, Oil City, PA 16301

Direct Payment PlanHave your monthly payment deducted automatically from your checking or savings account on the due date. That means no more check writing, check charges, postage costs or waiting in line. You can also turn off your paper bill, which helps to improve the environment.

Budget PlanLevel and predictable monthly natural gas bills can make budgeting easier. When you enroll in the Budget Plan, we analyze your yearly gas usage to develop your monthly payment amount so you can pay a steady amount each month.

Low Income Home Energy Assistance Program (LIHEAP)LIHEAP provides financial assistance to low- income households to help pay energy bills. LIHEAP is a federally-funded program administered by the Pennsylvania Department of Public Welfare and consists of three components:

• Cash Benefits – Helps low-income customers pay their home energy bills.

• Crisis – Helps low-income customers in emergency situations restore service if it has been shut off.

• Weatherization – Helps qualified, low-income customers reduce their energy consumption through home improvements.

Low-income customers can receive cash benefits and crisis assistance if they are eligible for both components of LIHEAP. For more information, visit www.LIHEAPhelps.com.

Low Income Usage Reduction Program (LIURP)LIURP helps low-income residential customers lower the amount of natural gas used each month. If you meet income eligibility requirements and have high energy usage, you could receive free weatherization services, home energy audits and information on energy conservation.

Low Income Residential Assistance (LIRA)LIRA offers low-income customers discounted rates, ranging from 10 to 70 percent based on income and household size, when eligibility requirements are met. Debt forgiveness is offered for pre-program debt over a 24 month period.

Neighbor For Neighbor Heat FundYou may qualify for a cash grant to pay past-due bills if you are age 55 or older, or if you or a member of your household has a handicap, disability or certified medical emergency.

To learn more about National Fuel’s payment options, assistance programs and special services, visit www.nationalfuelgas.com.

Let National Fuel help you manage your bills throughout the winter heating season with our payment options, assistance programs and special services.

Things to think about:

• Winter Heating Season

• Upgrade to Natural Gas Appliances

• Manage Your Bills

Comfort, Convenience and Savings – Natural Gas Appliances Make Your House a Home

Manage and control your winter energy use by upgrading to high-efficiency natural gas appliances.

Natural Gas – An Efficient Fuel SourceNatural gas appliances are more efficient than electric appliances across the entire energy cycle, from generation to the point of use. As a result, gas users conserve energy resources and reduce greenhouse gas emissions. Ninety percent of the energy from natural gas is delivered to customers as useful energy while less than a third of the energy used in the production of electricity is delivered

to customers. On average, gas usage per residential customer in the U.S. has decreased one percent per year over the last 40 years. While the number of residential customers has increased 27 million, or 71 percent, since 1970, total natural gas usage and greenhouse gas emissions resulting from that usage have remained flat, according to the American Gas Association (AGA).

Call 1-800-444-3130, 24 hours a day, 7 days a week.For Natural Gas EmErGENciEs

What makes up the average bill for National Fuel customers?1 All figures are based on actual data from

the 12 months ended June 30, 2010.

Did You Know You Have A Choice?Natural gas customers in Pennsylvania have the ability to choose their natural gas supplier through Customer Choice. A natural gas marketer may contact you by phone, or in-person at your residence. We encourage you to visit www.nationalfuelgas.com and view our “Choosing a Natural Gas Supplier” webpage under “For Home” for tips on comparing offers, a list of questions to ask marketers and a listing of authorized natural gas suppliers. Additional information on natural gas shopping and pricing is available at the Pennsylvania Office of Consumer Advocate’s website at www.oca.state.pa.us/Industry/Natural_Gas.

Have your heating system inspected by a qualified contractor before winter begins.A contractor should provide the following services during an inspection:

• Check the heat exchangers for cracks, rust and corrosion.

• Clean and check the flue and vent pipes for any obstructions, corrosion or pipe separations.

• Check your heating system for proper ventilation.

• Clean or replace all furnace filters.

• Check blower operation, clean and lubricate.

• Check and adjust any pilots and burners.

• Check that your gas appliances produce a sharp blue flame.

• Check all electrical connections and controls.

Always keep flammable materials outdoors, in approved containers and away from your furnace, water heater and all other natural gas appliances.

Natural gas appliances are rising in popularity due to their cost effectiveness and efficiency. Remember, when shopping for new appliances, compare energy efficiency ratings and annual operating costs for the full fuel cycle. Although many gas appliances are initially more expensive than their electric counterparts, they generally cost two to three times less to operate, have longer expected life spans and require relatively low maintenance. Over the life of your appliances, you could save hundreds or even thousands of dollars when you choose natural gas.

Interest 5¢

Earnings 9¢

Taxes 4¢

Operating Costs 27¢Gas Purchased

55¢

100UNITS OF SOURCE

ENERGY

100UNITS OF SOURCE

ENERGY

92UNITS OFENERGY

88UNITS OFENERGY

29UNITS OFENERGY

90UNITS DELIVERED

TO CUSTOMER

27UNITS DELIVERED

TO CUSTOMER

NATURAL GAS

ELECTRICITYBased on Current Fossil Fuel Mix of Coal, Oil and Natural Gas

SOURCE: Energy Solutions Center

Extraction,Processing andTransportation

Losses

Extraction, Processingand Transportation Losses

DistributionLosses

ConversionLosses

DistributionLosses