Why Natural Gas & Is It Available?

10-11-12Daniel Adamo

Business Development Director

Why Natural Gas?Why Natural Gas?

UGI InformationWhy Natural GasIs Gas AvailableLocal Fuel Switching ExamplesMarcellus Shale and the Commonwealth Pipeline

Discussion

UGI Utilities, Inc. is a natural gas and electric utility headquartered in Reading, PA

Made up of four companies that distribute natural gas and electricity serving customers in Pennsylvania and Maryland:– UGI Gas Service (UGI)– UGI Penn Natural Gas (PNG)– UGI Central Penn Gas (CPG)– UGI Electric

UGI UtilitiesUGI Utilities

UGI Service Territory

• 89% Residential• 11% Industrial/Commercial• Total Annual Gas Sales: ~ 154 BCF (billion cubic feet) • Total Annual Electric Sales: ~ 970 GWH (millions of kilowatt

hours)• UGI Utilities Gas Main Infrastructure: ~ 12,000 miles • Largest Gas Utility in Pennsylvania

UGI Utilities – Customer MixUGI Utilities – Customer Mix

Why Natural Gas?

Unique Situation– Oil Prices Remaining High– Natural Gas Prices at Historic Lows– Natural Gas is an American/Pennsylvania Fuel

Economics– UGI Calculator – Commercial

• www.ugi.com/businesscalculator • Oil Prices seen over the past winter

– $3 to $4 per gallon (eq $22 to $30 per Mcf)• Natural Gas Prices (Commodity/Distribution)

– $6 to $8 per Mcf (eq $0.81 to $1.08 per gal of oil)

• Average Savings – $12,000 / yr – Estimated - 7,000 gallons of oil @ $2.85 / gal for a system greater than 10 years old

Why Natural Gas?

Is Natural Gas Available?

Natural Gas Distribution System– Is there an existing gas main available in front of or close to

property requesting gas service

Tariff – Economic Justification – Core Customers–UGI is regulated by the Pennsylvania Public Utility

Commission–Tariff Guidelines Apply – Extension Language–Core Customers (existing customers) can not be harmed by

adding new customers• Customer contributions are sometimes required to aid

in extending natural gas service• Contributions can make justification to convert difficult

if a significant gas main extension is required

Next Steps

Is Natural Gas Available?

UGI’s GET-Gas (Growth Extension Tariff) Pilot

– Works for down-the-street, or next town over

– Utility can make reasonable market assumptions regarding the potential and timing for new customer connections

– Innovative extension funding approach allows new customers to use portion of savings from conversion to natural gas service, in particular, from fuel oil

– Minimizes any funding burden on existing customers

Is Natural Gas Available?

GET Gas

–Incremental customer surcharge covers gas main extension

–Supported by reasonable assumptions for future customer potential

–Incremental investments are recovered by surcharge to new residential/small commercial customers being added to gas main extended via GET

• Customer savings more than offset this incremental charge

–Customers added by GET pay a premise-based multi-year surcharge

–‘Keystone’ allowances for larger anchor customers

UGI added 14,000 residential and 2,011 commercial customers in 2012

UGI did spend $44.4 million extending natural gas service to customers in 2012

In 2012, UGI did set a record of adding 11,316 households that converted to natural gas from oil, electricity, propane, etc.

In the past year more than 170 businesses converted to natural gas in the Greater Reading Area

Fuel Switching ExampleFuel Switching Example

Project Potential Savings Over Current Fuel

E.J. Breneman, LP 34 %

Bulk Chemicals, Inc. 57 %

Misco Products 58 %

Twin Valley High School 62 %

Current Local Fuel Switching ExamplesCurrent Local Fuel Switching Examples

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Greater Berks County Chamber of Commerce

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Project Partnership

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Capitol Energy Ventures

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The Pipeline Details

• 120 miles of 30-inch pipe

• 800,000 dekatherms per day of capacity

• In-service in 2015

• Will cross and interconnect with several existing interstate natural gas pipelines

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The Pipeline Route

• Commences at the southern terminus of Inergy’s new MARC I Pipeline in Eastern Lycoming County.

• Crosses Lycoming, Columbia, Montour, Northumberland, Schuylkill, Berks, and Chester Counties; subject to final route adjustments.

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The Pipeline Route

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Serving High-Growth Mid-Atlantic Markets

• Offers greater supply diversity for the demand market• Provides access to Pennsylvania’s plentiful Marcellus

Shale natural gas production• Provides producers with access to demand markets

currently served through existing interstate pipelines

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Reaching Markets

• Points of interconnection planned with:o Transco Gas Pipeline in Lycoming and Chester

Countieso Texas Eastern Transmission Company in Berks

and Chester Countieso Columbia Gas Transmission in Chester Countyo Eastern Shore Natural Gas in Chester County

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The Benefits

• Jobs – Need we say more?o Project Development, Design, Engineering,

Construction, Operation, and more• Enhancing connectivity between growing demand

markets and developing supply regions• Using plentiful Marcellus Shale gas to help gain energy

independence

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Contact and More Information

Commonwealth Pipelinec/o: Inergy Midstream, L.P.Attn: David HookerTwo Brush Creek Blvd, Suite 200Kansas City, MO 64112dhooker@cwpipeline.com

http://www.commonwealthpipeline.com