New Rates, Rate Design and Energy Efficiency Programs Approved for Chattanooga Gas Customers

CHATTANOOGA, Tenn., May 24 /PRNewswire-FirstCall/ -- The Tennessee Regulatory Authority (TRA) today approved a new environmentally friendly rate design for Chattanooga Gas and provided for an increase in base rates.

"We are pleased to be the first utility in Tennessee with a rate design that will enable us to introduce an energySMART program intended to help our customers reduce their natural gas usage and their energy cost," said Steve Lindsey, vice president and general manager, Chattanooga Gas, a subsidiary of AGL Resources Inc. (NYSE: AGL). "The Tennessee Regulatory Authority implemented this rate design on a three-year trial basis, and time will tell if the modifications made to our proposal will yield the intended results."

The TRA approved Chattanooga Gas' request to implement the rate design, referred to as decoupling, beginning June 1. Decoupling is intended to allow the utility to promote energy efficiency without harming its financial stability. Under a traditional regulated environment, utilities recover fixed costs volumetrically, which some argue creates a disincentive for promoting energy efficiency.  Decoupling shifts some of the fixed costs related to providing service to monthly base charges while reducing volumetric charges.  

Customers will see a base rate increase of $3.00 per month beginning June 1. However, this increase in base charges is expected to be largely offset through reduced volumetric charges, so that a typical residential bill is only expected to increase by one tenth of a percent, or 60 cents per year. That increase is consistent with the TRA's approval for Chattanooga Gas to increase total revenues by $60,000.  

The approved rate adjustment is significantly lower than the amount requested by the company due primarily to the TRA's reduction of the company's return on equity (ROE).  TRA reduced the company's previously authorized ROE from 10.2 percent to 10.05 percent.  

"We want to thank the TRA for its thoughtful consideration of our rate case, however we disagree that the company's ROE should be reduced as a result of the new rate mechanism and believe the impact of decoupling is overstated," said Bryan Batson, senior vice president, Governmental and Regulatory Affairs, AGL Resources, parent company of Chattanooga Gas. "We will analyze the TRA's decision in its totality and determine how to proceed both operationally and from a regulatory perspective.

"This outcome would produce a lower ROE than in any of the other five states where we operate, some of which have gone through decoupling," Batson said. "It is important that Chattanooga Gas continue to attract capital and promote economic development just as it did recently in the effort to land the Volkswagen plant in the region, which required a significant capital outlay by Chattanooga Gas."

Today's decision included approximately $275,000 to be spent by the company over a three-year period to promote energy efficiency and provide programmable thermostats.

Also resolved was a separate issue of recovery of legal fees stemming from a multi-year legal dispute involving a case initiated by Tennessee's Office of the Attorney General. Chattanooga Gas will recover approximately $745,000 in legal expenses from the 2006 case.

About Chattanooga Gas

Chattanooga Gas, a wholly owned subsidiary of AGL Resources (NYSE: AGL), provides retail natural gas sales and transportation services to approximately 61,000 customers in Hamilton and Bradley counties in southeast Tennessee. The Chattanooga Gas service area includes the communities of Chattanooga, Cleveland, Red Bank, East Ridge, Lookout Mountain and Signal Mountain. For more information, please see www.chattanoogagas.com.

About AGL Resources

AGL Resources (NYSE: AGL), an Atlanta-based energy services company, serves approximately 2.3 million customers in six states. The company also owns Houston-based Sequent Energy Management, an asset manager serving natural gas wholesale customers throughout North America. As an 85-percent owner in the SouthStar partnership, AGL Resources markets natural gas to consumers in Georgia under the Georgia Natural Gas brand. The company also owns and operates Jefferson Island Storage & Hub, a high-deliverability natural gas storage facility near the Henry Hub in Louisiana. For more information, visit www.aglresources.com.

Forward-Looking Statements

Certain expectations and projections regarding our future performance referenced in this press release are forward-looking statements. Forward-looking statements involve matters that are not historical facts and because these statements involve anticipated events or conditions, forward-looking statements often include words such as "anticipate," "assume," "believe," "can," "could," "estimate," "expect," "forecast," "future," "goal," "indicate," "intend," "may," "outlook," "plan," "potential," "predict," "project," "seek," "should," "target," "would," or similar expressions. Forward-looking statements contained in this press release include, without limitation, the energySMART program that will help our customers reduce their natural gas usage and their energy costs, the estimated increase  in base rate charges and the offsetting in base rate charges by reduced volumetric charges. Our expectations are not guarantees and are based on currently available competitive, financial and economic data along with our operating plans. While we believe our expectations are reasonable in view of the currently available information, our expectations are subject to future events, risks and uncertainties, and there are several factors - many beyond our control - that could cause results to differ significantly from our expectations.

Such events, risks and uncertainties include, but are not limited to, changes in price, supply and demand for natural gas and related products; the impact of changes in state and federal legislation and regulation including changes related to climate change; actions taken by government agencies on rates and other matters; utility and energy industry consolidation; financial market conditions, including recent disruptions in the capital markets and lending environment and the current economic downturn; the impact of natural disasters such as hurricanes on the supply and price of natural gas; acts of war or terrorism; and other factors which are described in detail in our filings with the Securities and Exchange Commission, which we incorporate by reference in this press release. Forward-looking statements are only as of the date they are made, and we do not undertake to update these statements to reflect subsequent changes.

SOURCE AGL Resources