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Distribution Operations: Progress and Possibilities. Kevin P. Madden Executive Vice President Distribution and Pipeline Operations. What We Told You to Expect in 2003. Stability through regulatory compact Managing capital deployment Working to achieve authorized returns

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Distribution Operations:Progress and Possibilities

Kevin P. Madden

Executive Vice President

Distribution and Pipeline Operations


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What We Told You to Expect in 2003

  • Stability through regulatory compact

  • Managing capital deployment

  • Working to achieve authorized returns

  • Continuing to improve service

2003 Analyst/Investor Conference


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Stability Through Regulatory Compact

2003

  • No rate cases

  • All issues settled

  • Stable landscape

NO HEADLINES …

2003 Analyst/Investor Conference


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Authorized Versus Actual Returns

12.00

11.40

2003 Analyst/Investor Conference


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The Challenges of Managing Capital

  • Managing costs after years of reductions

  • Accretive customer growth

  • Retention (minimizing underutilized assets)

  • Managing program results

2003 Analyst/Investor Conference


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Managing Capital Deployment

$ in Millions

$257

Pivotal Propane

Business Technology

CGC

$171

VNG

$158

Business Technology

Distribution

CGC

Business Technology

AGLC

VNG

CGC

VNG

Distribution

Distribution

AGLC

AGLC

Pipeline

Replacement

Program

Pipeline

Replacement

Program

Pipeline

Replacement

Program

Environmental

Response Cost

Environmental

Response Cost

Environmental

Response Cost

FY 04 Preliminary Budget

FY 03 Expected

FY 02 Actual

2003 Analyst/Investor Conference


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Managing Our Average Net Cost Per New Meter Set

5% Reduction

2003 Analyst/Investor Conference


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Managing Our Average Net Cost Per New Meter Set

2003 Analyst/Investor Conference


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Managing Customer Growth

(All Utilities Combined)

2003 Analyst/Investor Conference


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Our Net Growth Rate Exceeds Comparable-Sized Companies

AGL net customer growth 11% greater than the national average for utilities with >1 million customers*

*Sourced from comparable companies via US DOT 2001-2002

2003 Analyst/Investor Conference


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This Is The Place To Be

  • We could not ask for a better place to do business

  • Net in-migration to the Southeast and Georgia continues to be strong

Source: US Census Bureau

2003 Analyst/Investor Conference


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Continuing To Add New Meter Sets

7% Growth

7% Growth

2003 Analyst/Investor Conference


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Our Customer Profile In Each Utility

VNG

AGLC

CGC

2003 Analyst/Investor Conference


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Retaining Customers ProvidesThe Greatest Value

Customer Care

Partnerships

With HVAC

Dealers and

Plumbers

Multifamily

Conversion

Programs

New Products and

Services

Realtor

Channels

Regulatory

Pricing Strategies

Partnerships

With Appliance

Retailers

Co-Marketing

Initiatives

Consumer Appliance

Rebate Programs

Commercial

Retention

Pieces of the Retention Puzzle

2003 Analyst/Investor Conference


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Retention of Customers in GA, TN, VA

  • Measure of Success

  • 36.5K regulated provider participation

  • 2,000 rebates redeemed in 15 weeks; 60% redeemed for gas furnaces – “the last burner tip to go”

  • 1,500 gas furnaces replacements financed

  • 4,400 gas units replaced in homes

  • Consumer Advocacy Marketing Campaigns

  • Consumers’ Gas Bill of Rights (GA)

  • Consumer Appliance Rebate Program (GA, TN)

  • Appliance Financing (GA, TN, VA)

  • HVAC Dealer Program (GA, VA)

2003 Analyst/Investor Conference


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Pipeline Replacement Program:A Source and Use of Capital

In FY 2009, an estimated $422 million will be transferred to rate base

2003 Analyst/Investor Conference


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Environmental Recovery Program

Calendar Year

2003 Analyst/Investor Conference


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Cash generated from the pipeline replacement and environmental recovery programs combined

2003 Analyst/Investor Conference


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We Deliver Financial Results environmental recovery programs combined

EBIT

Utility Operations

4% Growth

5% Growth

2003 Analyst/Investor Conference


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We Also Manage O&M per Customer environmental recovery programs combined

2003 Analyst/Investor Conference


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Improving Workforce Efficiency environmental recovery programs combined

4% Improvement

2% Improvement

2003 Analyst/Investor Conference


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Setting The Standard For Our Peers environmental recovery programs combined

1,410

1,382

Customers Per Employee

AGL Resources

  • Technology

  • Collective Bargaining

  • Performance Management

  • Incentive Compensation

250

Best Performer Lowest Performer

Based on the 2003 American Gas Association Best Practices Benchmarking Survey exclusive of outlying data

2003 Analyst/Investor Conference


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Improvement in Services environmental recovery programs combined

2003 Analyst/Investor Conference


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Where Does It Come From? environmental recovery programs combined

New Business Acquisition

Residential: 3+ burner tip strategy, multifamily complexes

Commercial: Process load or 2 tips, architects & engineersas key decision influencers

Retention

Gas Partnerships: retailers, HVAC dealers, plumbers, appliance vendors, realtors, marketers

Consumer Advocacy: campaigns for “at risk” groups

What To Expect In 2004

3%

1.5%

1%

2003 Analyst/Investor Conference


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What To Expect In 2004 environmental recovery programs combinedLowered Cost per New Meter and Greater Investment in Rate Base

A 5% or greater reduction in cost per new meter

Distribution

Up to $257 million in

projected capital

expenditures

2003 Analyst/Investor Conference


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Increased Productivity environmental recovery programs combined

Customers Per Employee

2% Improvement

Technology initiatives in 2004:

GPS, Marketer Self-Serve, Work Management

2003 Analyst/Investor Conference


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2004: Focus on environmental recovery programs combinedAll Components of Cost Structure

AGLC

CGC

VNG

2003 Analyst/Investor Conference


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2004 Goals environmental recovery programs combined

  • Sustain superior performance

  • Focus on interstate transportation realignment

  • Market to retain

  • Drive incremental productivity through technology

2003 Analyst/Investor Conference


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