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National Fuel Gas Distribution Corporation Fall 2010 Marketer/Supplier Teleconference

November 17, 2010

AGENDA

2:00 pm Welcome Dave Wolford 2:05 pm Operational Update Dave Wolford 2:15 pm Rates & Regulatory Update Mike Novak

o NY Mandatory Imbalance Cashout o NY GTOP Changes o Marketing Standards o PA SEARCH Update o NY Spring Tariff Filing Preview

3:00 pm Rates & Regulatory Update Tom Clark

o Pennsylvania Update

3:15 pm Gas Supply Update Bob Michalski

o Capacity Procedures o Low Flow Orifice Meter Retrofits

3:45 pm General Discussion All

4:00 pm Closing Dave Wolford

National Fuel Gas Distribution Corporation

Fall 2010 Marketer Teleconference

Operational Update

Presentation by: Dave Wolford

November 17, 2010

Transportation Customers

STAND-ALONE:

MONTHLY (MMT) -

NY - 2

PA - 0

DAILY (DMT) -

PA - 73

NY - 0

TOTAL 75

NFGDC Fall 2010 Marketer Teleconference

TOTAL 75

AGGREGATION:

NY (STBA) - 106,405

NY (DMT) - 47

PA (MMNGS) - 2,006

PA (SATS) - 10,561

TOTAL 119,019

TOTAL NFGDC 119,094

2

Marketer/Supplier Operations Support

� NFGDC provides a full range of business tools and support services:

� NFGDC Website:

http://www.nationalfuelgas.com/marketers/default.aspx

� Operating Procedures Manuals – GTOP

� Transportation Scheduling System – TSS


� Training

� Help Desks

� Scheduling: 716-857-7232

� Billing: 1-800-833-2751

� After Hours Scheduling Support

� Bi-Weekly Operational Teleconferences

� http://www.nationalfuelgas.com/marketers/announce.asp

3

New York & Pennsylvania Operations

� Meet daily delivery requirements (DDQs) to

serve market

� Manage storage inventories

� Required end of month storage inventory

percentages are minimums, not targets


percentages are minimums, not targets

� Deliver upstream supplies at primary firm or

acceptable alternate delivery points

� Customer usage and local production estimates

need to be as accurate as possible

4

New York & Pennsylvania Operations

� Enhancements to DDQ procedures over the past

several years have led to improved accuracy.

� DDQs are customer usage estimates based on

usage history, weather forecasts, actual

measurement, imbalance adjustments, etc.

� Production Daily Quantities (PDQs)


� Production Daily Quantities (PDQs)

� PDQs are estimates of local production based on

production volume history

� Market Pool and Production Pool operators should

monitor actual flowing volumes and may submit DDQ

and PDQ modifications via TSS

5

OPERATIONAL FLOW ORDERS

* TO MAINTAIN SYSTEM OPERATIONAL INTEGRITY *

• SYSTEM ALERT


• OFO

• UNAUTHORIZED OVERRUN

• CURTAILMENT

6

Questions?

NFGDC Fall 2010 Marketer Teleconference 7



Rates & Regulatory Update

Presentation by: Mike Novak

November 17, 2010

� Filed September 24, 2010

� Common Cash Out Mechanism for all Services (excl. SC-16 non-aggregated)

� Switch to Market Oriented Cash Out Pricing for Month End

Imbalances

� Cash Outs will be Mandatory rather than Voluntary

Based upon Existing SC-13D Month End Cash Out Mechanism� Based upon Existing SC-13D Month End Cash Out Mechanism

� Tiered Pricing using tolerance bands

� No changes to daily city gate imbalance rules

� Switch to SNL Financial as data provider for Cash Out Index

� Market Pricing will continue to be based upon DTI South Point


Proposed Effective Date January 1, 2011

� February 1, 2011 more likely – if so…

December 2010 Imbalances will roll over to February 2011 DDQs� December 2010 Imbalances will roll over to February 2011 DDQs

� January 2011 Imbalances will roll over to March 2011 DDQs

� New mechanism will be used for February 2011 processing during

mid-March 2011

� No rollover of February 2011 Imbalances to April 2011 DDQs


� The monthly cash out price is determined by averaging the

daily price at “Dominion South Point” plus transportation costs

(including upstream fuel shrinkage) to Company’s City Gate for

each day during the month.

� The cash out pricing tiers are as follows:� The cash out pricing tiers are as follows:


� Month End Imbalance Calculation

� Deliveries = Allocated City Gate & Local Production Receipts

for the month

� Usage based upon Calendar Month Estimate or Actual

Measurement (where available).Measurement (where available).

� Imbalance = Deliveries – Usage

� If Deliveries > Usage, then Surplus

� If Deliveries < Usage, then Deficiency

� Imbalance Position % = Imbalance / Usage

� Initial Pricing Tier Depends upon Imbalance Position %


� The Company will buy gas to resolve surplus imbalances

� The Company will sell gas to resolve deficiency imbalances

� When an Imbalance Holder’s Imbalance Position % falls within

-5% to 5%, the imbalance will be cashed out at market price

� When an Imbalance Holder’s Imbalance Position % falls � When an Imbalance Holder’s Imbalance Position % falls

outside -5% to 5%, the imbalance will be cashed out at a less

favorable price, i.e. a multiplier will be applied to the market

price.


IMPORTANT CONCEPTS:

� All of an Imbalance Holder’s Pool Imbalances are

combined into one pre-trading imbalance

� Generally, pools with a higher number of customers tend

to be closer to a zero imbalance percentage position than to be closer to a zero imbalance percentage position than

pools with only a few customers

� Combining pools produces the largest number of customers

possible for an Imbalance Holder

� Combining negative imbalance pools with positive

imbalance pools results in a combined pool with an

imbalance closer to zero.


IMPORTANT CONCEPTS (continued):

� Treatment of Prior Period Adjustments (PPAs)

� PPAs will not hurt an Imbalance Holder

� PPAs will be used to benefit an Imbalance Holder whenever

possiblepossible

� If PPAs worsen an Imbalance Holder’s imbalance (further from

zero), the Imbalance Holder will retain its initial pricing tier

� If PPAs improve an Imbalance Holder’s imbalance (closer to

zero), the adjusted imbalance will be used to calculate a new

pricing tier

� If PPAs “flip” an Imbalance Holder’s imbalance, e.g. from surplus

to deficiency, the Imbalance Holder will be assigned to the

market pricing tier



� Imbalance Trading� Six Trading sessions, morning and afternoon, over a three business-day

period

� The Company will only process trades that improve an Imbalance � The Company will only process trades that improve an Imbalance

Holder’s position (imbalance closer to zero)

� Past history has been that even in months where the system imbalance

is in one direction (positive or negative), there are pools with opposite

imbalance positions

� The final pricing tier applicable to an Imbalance Holder is calculated at

the close of trading

� Small Volume Safe Harbor

� Any imbalance under 1000 Mcf assigned to Market Pricing Tier



� Imbalance Management� The Company has been refining the DDQ calculation process and

believes that marketers that deliver the DDQs provided should achieve

market pricing, however;market pricing, however;

� Marketers should be in communication with customers, particularly larger, non-

residential customers and communicate unanticipated changes in load to the

Company via requests for DDQ adjustments.

� Marketers that over-utilize daily DDQ flexibility decrease the likelihood they will

achieve the market pricing tier

� Marketers that are over-reliant upon the local production excess allocation

methodology, i.e. under nominate production pool receipts, decrease the

likelihood they will achieve the market pricing tier


� Imbalance Calculation Example #1

Marketer Pool

Monthly

Deliveries

Monthly

Usage

Monthly

Imbalance

Illustrative

Imbalance

Percentage

Illustrative

Cash Out

Tier


Daily Customer Pool 100000 97345 2655 2.73% Market Sell

Monthly Large Customer Pool 150000 165267 -15267 -9.24% Tier 1 Buy

STBA Pool 1 52000 50276 1724 3.43% Market Sell

STBA Pool 2 48000 49765 -1765 -3.55% Market Buy

Combined Pre-Trade Total 350000 362653 -12653 -3.49% Market Buy

Imbalance Resolution

Company Sale to

Marketer 12653 Market

18

� Imbalance Calculation Example #2

Marketer Pool

Monthly

Deliveries

Monthly

Usage

Monthly

Imbalance

Illustrative

Imbalance

Percentage

Illustrative

Cash Out

Tier PPAs

Daily Customer Pool 100000 97345 2655 2.73% Market Sell -234



Monthly Large Customer Pool 150000 165267 -15267 -9.24% Tier 1 Buy 1500

STBA Pool 1 52000 50276 1724 3.43% Market Sell 2365

STBA Pool 2 48000 49765 -1765 -3.55% Market Buy 2574

Combined Pre-Trade Total 350000 362653 -12653 -3.49% Market Buy 6205

PPA Adjusted Pre-Trade Total 350000 368858 -18858 -5.11% Tier 1 Buy


Company Sale to


19

� Imbalance Cash Out Example #3

Marketer Pool

Monthly

Deliveries

Monthly

Usage

Monthly

Imbalance

Illustrative

Imbalance

Percentage

Illustrative

Cash Out

Tier PPAs

Daily Customer Pool 100000 97345 2655 2.73% Market Sell 234



Monthly Large Customer Pool 150000 175267 -25267 -14.42% Tier 1 Buy -5500

STBA Pool 1 52000 54435 -2435 -4.47% Market Buy -2365


Combined Pre-Trade Total 350000 377300 -27300 -7.24% Tier 1 Buy -10205

PPA Adjusted Pre-Trade Total 350000 367095 -17095 -4.66% Market Buy


Company Sale to


20


Marketer Pool

Monthly

Deliveries

Monthly

Usage

Monthly

Imbalance

Illustrative

Imbalance

Percentage

Illustrative

Cash Out

Tier PPAs








PPA Adjusted Pre-Trade Total 350000 371095 -21095 -5.68% Tier 1 Buy

Imbalance Trades 5000

Post-Trade Total -16095 -4.34% Market Buy


Company Sale to


21


Marketer Pool

Monthly

Deliveries

Monthly

Usage

Monthly

Imbalance

Illustrative

Imbalance

Percentage

Illustrative

Cash Out

Tier PPAs








PPA Adjusted Pre-Trade Total 350000 328627 21373 6.50% Tier 1 Sell


Marketer Sale to

Company -21373 Market

22

� Potential Filing Refinements

� System Imbalance Safe Harbor

� Imbalance Holder DDQ Safe Harbor

� Unauthorized Period Clarification

� SC-11 Based Pricing (the current voluntary cash out rate) would be used

for deficiency imbalances if an entire month was within an for deficiency imbalances if an entire month was within an

Unauthorized Period

� Cash Out Suspension Clarification

� Tariff reserves a Company Right to revert to Roll Over methodology,

however;

� The Company does not expect this would occur

� An example of when the Company could revert to Roll Over would

be a failure of the Market Pricing System


� Anticipated filing in early 2011� General Administrative Items

� Conforming changes in response to anticipated Order on

Cash Out filing

� UBP II Related Changes, if available & applicable� UBP II Related Changes, if available & applicable


� PA Marketing Guidelines (M-2010-2185981):� Initially developed electric competition by CHARGE (Committee

Handling Activities for Retail Growth in Electricity); later modified for

gas competition by SEARCH

� Final Order Issued November 4, 2010

Adoption of Interim Guidelines for Marketing and Sales Practices for � Adoption of Interim Guidelines for Marketing and Sales Practices for

Electric Generation Suppliers (EGSs) and Natural Gas Suppliers

(NGSs) as set forth in the Order and in Annex A

� The interim guidelines covered a wide range of topics and

recommended best practices for door-to-door marketing and

telemarketing and sales

� They provide important guidance on best practices for marketing and

sales activities for the residential market


� PA Marketing Guidelines (M-2010-2185981):� Next Steps

� PUC Staff is holding a meeting on 11/18 @ 1:30 p.m. to discuss the key

provisions of the Marketing Guidelines and highlight other important

consumer protection requirements. This meeting will be held in Executive

Chambers, Third Floor, Keystone Building, Harrisburg. To participate by Chambers, Third Floor, Keystone Building, Harrisburg. To participate by

telephone, please call 1-866-618-6746 and use the access code: 6060145

� The Office of Competitive Market Oversight (OCMO), in consultation with the Law Bureau, will prepare a proposed rulemaking based on the Interim Guidelines by February 1, 2011

� OCMO will monitor EGS and NGS independent contractor employment and prepare a report and recommendation no later than April 30, 2011 on whether each independent contractor should also be licensed as a supplier

� PUC Web Link:http://www.puc.state.pa.us/general/ConsolidatedCaseView.aspx?Docket=M-2010-2185981


� NY UBP changes:� Developed in response to recently enacted General

Business Law Section 349-D, addressing:� Door-to-door sales

� Deceptive acts or practices in marketing of energy services

� Customer prepayments� Customer prepayments

� Termination/cancellation fees

� Customer consent to changes in terms or duration of contract

� Other related issues

� The Law provides for each prospective customer to be provided with an “ESCO Consumer Bill of Rights”


� NY UBP changes (continued):� Technical Conference held on October 6, 2010 to

discuss draft ESCO Consumer Bill of Rights and UBP changes necessary to implement GBL §349-d� Proposed changes were noticed in the NYS Register on � Proposed changes were noticed in the NYS Register on

September 29, 2010� Multiple parties have filed comments

� An Order is anticipated during December 2010

� GBL §349-d is to be implemented on January 11, 2011


� UBP II Working Groups (2009)� Topics included: Retail Access/ESCO Referral at Initiation of Service; Utility

Initiated Drops; ESCO Customer Complaint Rate Reporting; ESCO Consolidated Billing; Provision of Tax Data to ESCO; Direct Marketing/Provision of Customer Lists ; ESCO Price Reporting Requirements; 18a Assessment Billing Issues.

� Comments Filed; Awaiting an Order

� ESCO Contest Period� ESCO Contest Period� An Incumbent ESCO can stop a customer’s switch to another ESCO under

certain circumstances – Ordered

� An Incumbent ESCO can stop a customer’s switch to back to Utility Sales Service under certain circumstances

� Proposed; Comments Filed; Awaiting an Order

� EDI changes� Transactions & Process


Stakeholders Exploring Avenues to Remove Competitive Hurdles

� Proposed Rulemaking (Docket L-2008-2069115)

� NGS licensing and security issues.


Business Rules: NGDC Customer Choice System Operations Plan � Business Rules: NGDC Customer Choice System Operations Plan

including Business Practices (NAESB); Supplier Coordination Tariffs;

Communication Standards and Formats.


� NGDC relationship with the market: Price to Compare; Purchase of

Receivables(POR); Mandatory Capacity Assignment; NGDC Costs of

Competition Related Activities; and Regulatory Assessments.



� NGS licensing and security issues (Docket L-2008-2069115)

� Final Rulemaking Order adopted June 16, 2010

� Regulations revised to include the development of reasonable criteria for establishing the

initial security amount and for adjusting the security amount for a NGS license, regardless

of whether the request for the adjustment is made by the NGDC or the NGS

NGDCs will have an annual reporting requirement that will permit the Commission to � NGDCs will have an annual reporting requirement that will permit the Commission to

collect data relating to the adjustment of security amounts and the triggering events,

financial and/or operational, that triggered the adjustment

� Use of escrow accounts, cash, and NGS accounts receivable in a Commission approved POR

program to reduce the total security requirement will be permitted

� Establishes a process by which a supplier can request a reduction in security amount, and

an informal procedure that may be used by the NGS in lieu of filing a formal complaint to

resolve a dispute with a NGDC over the amount of security required for licensing

� Regulations become effective upon publication in the Pennsylvania Bulletin which has not

yet occurred



� Business Practices (Docket L-2009-2069117)

� Proposed Rulemaking Order entered May 1, 2009

� “to revise and, when feasible, to standardize natural gas distribution company (NGDC)

business practices, operating rules and supplier coordination tariffs”

� Published in PA Bulletin on October 17, 2009

Comments filed in December 2009� Comments filed in December 2009

� Meeting held June 23, 2010

� Supplier Coordination Tariff

� Discussion of Sample Template; Identification of Other Models

� NGDC Business Practices

� Review of Comments to Proposed Rulemaking

� Electronic Data Communication Standards

� Discussion of Preferred Method; Implementation Plan

� Follow-Up Meeting held August 26, 2010

� Primarily Operational Issues; comparison of NGDC Choice service rules & characteristics



� Promotion of Competitive retail Markets (Docket L-2008-2069114)

� Initial Proposed Rulemaking Order issued On March 27, 2009

� Comments Filed during August 2009

� Advance Notice of Final Rulemaking Order adopted July 29, 2010

� Commission sought further comment

(1) Price to Compare formulation, (1) Price to Compare formulation,

(2) Reconciliation and quarterly adjustments,

(3) Purchase of Receivables programs,

(4) Mandatory capacity release and non-discrimination,

(5) Cost recovery of competition-related activities, and

(6) Cost recovery of regulatory assessments

� Comments filed during September 2010

� Relative to SATS Service, the Company is still concerned about the final

outcome for capacity release. The draft regulations appear to mandate “Slice

of the System”



� 2011 Timeline/Events

� We anticipate further discussions

� We anticipate some Orders

� Tariff Changes related to SEARCH� Tariff Changes related to SEARCH

� Will depend upon what is Ordered…

� GTOP could evolve into a “Supplier Coordination Tariff”

� Potentially, the organization of Supplier Coordination Tariffs

would be standardized amongst NGDCs but the content would

still be NGDC specific

� This approach provides flexibility; recognizes key differences


� Likely Topics:� Storage

� Start of Month & End of Month Inventory Percentages

� Handling of End of Month Deficiencies� Paybacks could be replaced with inventory sales

� SC-21 Changes� SC-21 Changes� Transportation Service for Electric Generators with exclusive use

in a dual fueled electric generation facility having capacity of at least 50 Megawatts� No current customers

� Intention is to reformulate service to be more like SC-13D� Rates will not be changed

� Other Administrative & Housekeeping


Questions?




Pennsylvania Update

Presentation by: Tom Clark

November 17, 2010

� Purchase of Receivable filing� Tariff effective July 15, 2010

� Established Merchant Function Charge� 2.2301% - Residential

� 0.2285% - Non-Residential

� Applies to Gas Adjustment Charge & Natural Gas Supply Charge� Applies to Gas Adjustment Charge & Natural Gas Supply Charge

� Changes quarterly or when rates change

� Eligibility

Residential

Small Com./PA customers less than 1,000 Mcf/Year

Small Industrial less than 1,000 Mcf/Year


� Annual 2010 1307(f) – Effective August 2010

� Gas cost - $1.8560/Mcf increase to $6.8907/Mcf

� DMT/MMT retained gas cost percentage reduced from

0.54% to 0.46%

MMT gas cost charge remained unchanged at $0.23/Mcf� MMT gas cost charge remained unchanged at $0.23/Mcf


� November 2010 quarterly filing $/Mcf

Natural Gas Supply Gas Adjustment Distribution TotalCharge Charge Charge Gas Cost

(A) (B) (C) (D=A+B+C)$ $ $ $

Projected Gas Costs Demand 1.4554 0.0366 0.2440 1.7360 Commodity 4.9343 (0.8287) 0 4.1056 Total Projected Cost 6.3897 (0.7921) 0.2440 5.8416

Gas Cost (8/10) 7.3973 (0.7488) 0.2422 6.8907

Increase (Decrease) (1.0076) (0.0433) 0.0018 (1.0491)

% Change (15.23%)


� 2011 1307(f) filing� Gas cost recovery for Sales and Transportation Service

January 3, 2011 – Exhibits filed

February 1, 2011 – Testimony /Additional Exhibits filedfiled

� To intervene in the filing send a letter or request form to:

Pennsylvania Public Utility Commission

Post Office Box 3265

Harrisburg, PA 17105-3265


Questions?




Gas Supply Update

Presentation by: Bob Michalski

November 17, 2010

� Mandatory Upstream Transmission Capacity –

“MUTC”

� Grand Fathered Upstream Transmission Capacity –

“GUTC”

Grand Fathered Intermediate Transmission Capacity –� Grand Fathered Intermediate Transmission Capacity –

“GITC”


� MUTC is released at NFGDC’s weighted average upstream

transmission capacity reservation cost. The mix of capacity

and the associated release rates are reviewed and subject

to adjustment each April 1st but may adjust sooner if the

weighted average cost of capacity for any month changes

from the April 1st value by greater than 5%. from the April 1st value by greater than 5%.

� 30 day notice before any substantial change.


� Updated Capacity Mix Effective 4/1/2010:� NFGSC ESS (MDWQ) - 12% released at maximum rate

� TGP- Z1-Z4 - 88% released below max. rate ($10.5633/Dth)

� Associated NFGSC EFT released at maximum rate


� Winter 2010-2011 expectation:� Days forecast colder than 50 DD (mean temperature 15

degrees Fahrenheit or less) may call for delivery at primary

point(s), currently Rose Lake.

� Voluntary compliance helps to avoid a firm requirement.� Voluntary compliance helps to avoid a firm requirement.

� Summer 2011:� Likely that delivery to primary point(s) will not be needed.

� Notice of any capacity release adjustments or minimum flow requirements would be provided prior to April 1, 2011.


� Check the website regularly for system alerts and gas flow

directives!


� GUTC or (GITC) will be reduced if:� 1. An STBA’s peak requirement during the 13 month April to

April review window is at least 500 Dth/day less than its prior peak requirement.

� 2. At the July 1st (or May 1st) deadline, the STBA demonstrates a reduced level of GUTC/GITC for the coming demonstrates a reduced level of GUTC/GITC for the coming winter.

� 3. The STBA requests a reduction.

MUTC will be assigned if an STBA’s peak day requirements exceed its combined level of GUTC/GITC plus local production capacity.


� Recent GUTC Levels:November 2007 98,684 Dth/day

April 2009 93,572 Dth/day

April 2010 90,755 Dth/day

July 2010 90,147 Dth/dayJuly 2010 90,147 Dth/day

MUTC will be assigned if an STBA’s peak day requirements

exceed its combined level of GUTC/GITC plus local

production capacity.


� Released Transmission Capacity (“RTC”)

� RTC is released at NFGDC’s weighted average

upstream transmission capacity reservation cost.

The mix of capacity that is released and the

associated release rates are reviewed and subject to associated release rates are reviewed and subject to

adjustment effective each August 1, pursuant to NFGDC’s

section 1307(f) filings.


� RTC Mix Effective 8/1/2010:� NFGSC ESS (MDWQ) - 63% released at maximum rate

� TGP- Z1-Z4 - 37% released below max. rate ($10.3375/Dth)

� Associated NFGSC EFT released at maximum rate


� Check the website regularly for system alerts and gas flow

directives!


� Availability subject to operational requirements.

� Averaging will be suspended when any weekend or

holiday related gas day’s mean temperature is

forecast to be 15 degrees Fahrenheit (50 DD) or

colder.colder.

� Notice of non-availability of DDQ averaging for a

given period will be provided on the prior business

day.


� New York

� Three Year Program that ends 12/27/2010 to retrofit local

production orifice meters with rotary meters to provide

industry standard measurement. 322 of 342 meters have

been completed.been completed.

� Pennsylvania

� Approximately 65 meters are eligible for retrofit.

� Program will run through 9/30/2013.


Questions?


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