Virginia Natural Gas Plans for Winter Heating Season With Additional Capacity

October 25, 2004

NORFOLK, Va. – (Oct. 25, 2004) – Recent forecasts by the U.S. Energy Information Administration and the American Gas Association indicate that consumer prices for natural gas may be as much as 15 percent higher during the upcoming winter heating season than last year.

Despite the high prices and volatility of the energy market, Virginia Natural Gas (VNG), a subsidiary of AGL Resources (NYSE:ATG), reports that there is also good news for the upcoming heating season: Pivotal Propane of Virginia, another subsidiary of AGL Resources, will complete construction of a state-of-the-art propane plant that will add needed capacity to the region. In addition, inventories of stored gas are at record levels in preparation for winter.

“Wholesale natural gas prices are quite sensitive to the weather,” said Hank Linginfelter, president of Virginia Natural (VNG). “Hurricane Ivan and the other storms that hit the Gulf of Mexico this fall have hampered production, and an extremely cold winter could place a high demand on supplies, which will drive wholesale prices up.”

Linginfelter said VNG recently filed its 4th quarter gas rates with the Virginia State Corporation Commission, and the prices are about 2 percent lower than last quarter. Although VNG customers might increase the amount of gas they use during November and December, their rates are slightly lower than they have been for the past three months.

“We are actually only about 5 percent higher than this time last year, despite the market’s volatility” said Linginfelter. “Unless extreme weather conditions or other major events occur that would impact prices, the prices for January through March 2005 should be about the same as the same time in 2004.”

According to Linginfelter, the wholesale price of natural gas was relatively stable during the 1990s – around $2 per thousand cubic feet (Mcf) – because plenty of natural gas was available. Since 2000, however, natural gas prices have risen and sustained themselves at $4 or more due in part to the tight market, increased use of natural gas to generate electricity and public policies that have made it increasingly difficult for energy producers to keep up with consumer demand.

“We have seen higher gas prices during the past couple of years because the demand has increased from electric generation and industrial users, and drilling hasn’t kept up,” Linginfelter said. “In addition, the country’s economy has been robust, and the record pace of homebuilding has added new residential and commercial customers who have chosen natural gas for heating and cooking for their homes and businesses.”

According to Linginfelter, the United States has large natural gas reserves, so there is no shortage, but most of this gas lies beneath federally protected lands or below the ocean. The wells currently in operation are aging and do not yield as much gas.

“Our Congressional leaders must focus on an energy policy that among other things opens more federal land for oil and gas exploration,” he added. “We need to encourage the construction of additional natural gas pipelines, including a critical one from Alaska to the Midwest, and expedite the construction for liquefied natural gas import facilities.”

In addition to the cost of the gas itself, natural gas bills reflect the costs of bringing the gas to Norfolk, said Linginfelter. A portion of VNG customers’ monthly bills is a delivery charge regulated by the Virginia State Corporation Commission.

“Delivery charges represent the cost of bringing gas to your home or business, pipeline maintenance and meter reading,” said Linginfelter. “VNG has not had a delivery rate increase since 1996. We have managed our business efficiently and have added technology and productivity tools to everything we do in order to keep our costs down.”

According to the U.S. Energy Information Administration (EIA) the cost of heating an average home from November 2003 – April 2004 with natural gas was $883, which is less than heating oil ($977) and propane ($1,202). Based on EIA data, on a price-per-gallon basis, heating oil is up 61 percent this year while propane has increased by 31 percent and the cost of natural gas is projected to increase by between 11 and 15 percent this winter heating season.

“Due to higher prices, some families may need help in budgeting for their heating costs,” said Linginfelter. “We offer a budget payment plan for customers who want to level those ‘swings’ from summer to winter in their bills.”

VNG’s Budget Payment Plan allows customers with accounts paid in full to pay a fixed monthly amount throughout the year based on actual gas use. VNG periodically reviews accounts to keep payments in line with fuel charges and usage factors.

Families who need financial assistance to pay their heating bills also have some alternatives, Linginfelter pointed out.

“If you or someone you know is having trouble paying a gas bill, and they have exhausted all alternatives available through social services, help is available through our EnergyShare program administered through The Salvation Army,” he said. “Applications will be taken beginning in January.”

During the winter of 2003-2004, VNG donated more than $80,000 to EnergyShare through customer contributions ($40,000) and company matching funds.

“VNG will continue to support EnergyShare this winter, and we hope our customers will join us in assisting our less-fortunate neighbors,” said Linginfelter.

EnergyShare envelopes are being included in the October bills.

For more information, please visit www.virginianaturalgas.com.