Natural Gas Vehicles Strategic Considerations

National Conference of State Legislatures

August 11, 2013

Corporate Overview

Largest Natural Gas Utility Company 7 Local Distribution Utilities in 7 states 4.5 million customers

Tropical Shipping

Price Stability of CNG

Natural Gas at $2.88/Mcf

Natural Gas (divide by 7.2) $0.40

Transport Costs & Fees $0.20

Electricity Costs per GGE $0.10

Maintenance per GGE $0.20

Federal and State Taxes $0.25

Fuel Card Fees per GGE $0.05

Retailer Profit Margin $0.70

CNG at the Pump $1.90

Natural Gas at $5.76/Mcf

Natural Gas (divide by 7.2) $0.80

Transport Costs & Fees $0.20

Electricity Costs per GGE $0.10

Maintenance per GGE $0.20

Federal and State Taxes $0.25

Fuel Card Fees per GGE $0.05

Retailer Profit Margin $0.70

CNG at the Pump $2.30

The natural gas fuel commodity makes up a smaller portion of the overall price of the delivered fuel when compared to gasoline or diesel.

The Economics of Vehicle Classes

Type of Vehicle

Incremental Cost *

Annual Use (Gals.)

Annual Savings **

Simple Payback

Honda Civic (consumer) $7,500 500 $750 10 yrs.

Sedan (fleet application) $10,000 1,200 $1,800 6 yrs.

Pickup Truck (fleet app.) $11,000 2,000 $3,000 4 yrs.

Cargo Van $14,000 2,500 $3,750 4 yrs.

Step Van/Box Truck $24,000 4,000 $6,000 4 yrs.

School Bus $28,000 2,600 $3,750 7 yrs.

Garbage Truck $35,000 8,000 $12,000 3 yrs.

Class 8 Truck $65,000 15,000 $22,500 3 yrs.

* Cost assumes no grant money, rebates, tax credits, etc. available

* * Savings calculated based on savings of $1.50/GGE at retail CNG station

The Light Duty Market Challenge $500,000+ for Centralized Fueling Stations

• 500 down, 160,000 to go - $50+ billion? in investment to match gasoline stations

• The economics work for fleets, so there will continue to be growth

• $100,000?+ to make a private station public accessible

$8,000+ Vehicle Conversion/Replacement Premium • Takes 7 years+ to recover the premium

• Limited vehicle selection from OEM’s, especially vehicles desired by target customers

• Efforts around conversion, and specifically tank technologies, is ongoing

$5,000 Home Refueling Appliance (HRA) product and Installation Cost • An additional 4+ years to recover the HRA cost

• Limited fill capability, maintenance unknown (historically not good)

Result: $8,000 + $5,000 = $13,000 per vehicle premium, or 11+ years payback

MUST REDUCE VEHICLE CONVERSION COSTS & DEVELOP A LESS EXPENSIVE HRA

The Home Refueling Appliance (HRA) BRC Fuelmaker Phill is the only commercially available HRA

• Expensive price with installation, approximately $6,000 • Limited fill capability, less than a half gallon per hour • Historically has had compressor performance and maintenance issues • AGL is a distributor, and installs and maintains Phill units

AGL Resources is actively engaged with a team of industry leaders in the development of a less costly HRA

• AGLR has joined with EnCana, Questar, SoCal Gas, DTE Energy, and a large Appliance Manufacturer to evaluate options

U.S. Department of Energy - Advanced Research Projects Agency- ENERGY (ARPA-E) – Methane Opportunities for Vehicular Energy (MOVE)

• 13 projects awarded with $30 million in funding – including 4 HRA designs • Engineer Light-Weight Affordable Natural Gas Tanks • Develop Natural Gas Compressors that can efficiently fuel a NGV at home • GTI and GE have projects within this program, and AGL is actively involved

The LDC and HRA Advantage • Natural gas is priced without a “margin” mark-up, therefore preserving and assuring the price differential for the customer.

• Utilities are buying large quantities of supply, and can achieve economies of scale, efficiency and can hedge in their fuel purchasing.

• Most markets still provide options that allow for direct purchase from marketers, providing customers the opportunity to fix the price of natural gas for a period of time.

• Some Utilities have established rate tariffs that incentivize customers to convert to natural gas vehicles.

• The utility provides a skilled network of field service technicians that can assure safety is maintained as the market grows. • Highly reliable, safe, accurately measured delivery of the natural gas provides a trusted existing and solid foundation for growth.

AGL’s Experience • In the NGV/CNG business since the 1970’s

• Owns and maintains eight CNG refueling stations on customer premises

for fleet vehicles in Georgia (city/county maintenance vehicles, forklifts, etc.)

• Provide CNG maintenance services to 30+ other commercial customers

who own their own equipment

• Department of 6 full time, 24 hour emergency dispatched, professionally

trained CNG technicians

• Developed the MARTA CNG transit bus program in 1996

• Contracted with Alagasco in 2012 to maintain existing and construct new stations

AGL Resources Activities Key 2013 Initiative - AGL Resources is in the process of finalizing an enterprise-wide fleet conversion plan, including the associated CNG infrastructure development. Georgia – Atlanta Gas Light

• Investing $11.57 million of USF to support development of publicly accessible CNG stations throughout its service territory in Georgia • 6 contracts have been executed, with construction commencing in 2013 • AGL will be planning, constructing and maintaining these CNG filling stations • USF backed Home Refueling Appliance leasing program has been implemented • Reviewing additional upgrades and installation at AGLC service centers

AGL Resources Activities Illinois – Nicor Gas

• Favorable government programs support NGV efforts (i.e. $4,000 state rebate). • 17 CNG stations already attached to the distribution system.

Tennessee – Chattanooga Gas

• Established a new tariff for construction of CNG stations for customers. • Discussing a new station in 2014, with possible City of Chattanooga support.

Virginia – Virginia Natural Gas • 3 existing public access CNG stations – station upgrades underway in 2013. • Qualified CNG technician on staff to provide service and maintenance

Florida – Florida City Gas • Filed a new tariff for CNG station construction • Actively engaged in draft legislation providing incentives for vehicle purchases

5 year tax holiday on fuel tax, HRA tax exemption, $6 million a year for 5 years

toward incremental vehicle cost ($250,000 cap per entity/$25,000 per vehicle)

New Jersey – Elizabethtown Gas • Planning a replacement of an existing station with a significant station for ETG fleet usage, as well as local fleet and public access. • Working with the Port of Elizabeth on a number of opportunities requiring station construction and maintenance. • Expecting to file new CNG tariffs in the next 60 days.

Natural Gas Fueling our Future