Virginia Natural Gas (VNG) announced today it has filed an application for a new Conservation and Ratemaking Efficiency plan with the Virginia State Corporation Commission (VSCC). The plan calls for new energy conservation programs, coupled with an alternative rate mechanism, designed to assist customers in lowering their energy bills. As part of the plan, VNG will devote $7.5 million over three years to these new conservation initiatives with a projected customer savings of $39.5 million over 10 years.

The Virginia General Assembly recently passed the Natural Gas Conservation and Ratemaking Efficiency Act, which is intended to encourage natural gas utilities to file conservation programs and an alternative rate design in light of increasing energy costs, and to reward utilities that assist customers in reducing energy consumption and energy bills. Proposed plans must be approved by the VSCC.

"We are pleased to be the first natural gas utility in Virginia to propose a Conservation and Rate Making Efficiency plan," said Jodi Gidley, president, Virginia Natural Gas. "Our plan will provide consumer outreach, education and a series of new conservation programs to assist customers in using energy more wisely, lowering their energy costs and reducing environmental impacts."

Today, 77 percent of the typical residential customer's bill is the cost of the natural gas the utility purchases and delivers to the customer with no mark-up or profit. The remaining 23 percent is the utility base charge that allows the utility to recover the costs they incur to maintain safe and reliable service. By taking advantage of the new conservation programs VNG is proposing, customers can reduce the commodity side of their bills. Over the long-term this may lower overall natural gas prices by decreasing demand.

The plan separates distribution revenue from gas consumption through the use of a conservation rider, allowing the utility to recover the cost of providing reliable service based on normal customer usage.

"The ever increasing cost of energy and projections of continued high prices and volatility makes it increasingly important to focus on effective long-term efficiency and conservation measures," said Gidley. "Now is the perfect time to provide consumers with the tools they need to decrease their energy usage and better manage their costs and to remove the disincentive for utilities to encourage conservation."

The plan creates several new initiatives aimed at helping consumers reduce their natural gas consumption and use energy more efficiently. These new programs include:

-- Community outreach and customer education program -- This program will raise awareness of the importance of energy conservation among VNG's customers, and also inform customers of the specific programs available to help them conserve natural gas and lower their energy bills.

-- High efficiency home heating program -- This program will provide incentives designed to encourage customers, when they choose their furnace, to do so with a natural gas furnace which operates at 90 percent or better efficiency. This particular program has the potential to have the greatest effect on reducing natural gas consumption for residential customers.

-- High efficiency water heater programs -- These programs, one for natural gas tank water heaters and one for natural gas tankless heaters, will consist of incentives designed to encourage customers to move towards highly efficient natural gas water heaters. Incentives would encourage customers to choose tanked units with either an energy factor of 0.62 or greater or a tankless water heater with an energy factor of 0.82. A water heater is typically the second largest user of natural gas in most homes.

-- Low-income home weatherization program -- This program will address the needs of low-income residential customers, and is designed to improve energy affordability. This will be accomplished through the direct installation of cost-effective energy efficiency measures in the home (determined on a home-specific basis) which may include: efficient lighting products; hot water and water heating conservation measures (water heater insulation, water heater pipe insulation and energy-saving showerheads and aerators); replacement of inefficient refrigerators; thermostats; insulation upgrades (attic, wall, etc.); blower-door guided air sealing; duct sealing and repair; heating/cooling equipment maintenance and other dwelling-specific measures, personalized customer energy education and counseling. In addition to weatherization measures, equipment and appliance repair or aid with appliance replacement will be part of the program. Participants are asked to partner with the program to develop and carry out a household energy savings Action Plan. All efficiency measures and energy education services are provided free of charge. Customers with an income at or below 175 percent of the federal poverty guidelines would be eligible.

-- Seasonal check-up program -- Under this program, VNG proposes a partially subsidized home check-up to help customers control their current energy costs. A customer would have a 21 point check-up and inspection of their heating and cooling system, which would include a filter examination and recommended energy saving measures like the installation of a modern set-back thermostat, weather stripping or equipment repair or replacement. VNG would provide a $25 incentive payment to customers to apply to the cost of the seasonal check-up or the purchase of a programmable thermostat. Dirty filters, inefficiently operating equipment and overuse of energy when customers are not home often lead to as much as a 10 percent increase in energy consumption.

-- ENERGY STAR(R) residential new construction program -- This program is proposed as a pilot capped at 100 customers, and is designed to encourage the installation of highly energy efficient ENERGY STAR(R) rated natural gas equipment in residential new construction rather than the standard less costly and less efficient equipment.

If approved by the VSCC, the new programs could be launched as early as January 2009.

About Virginia Natural Gas

Virginia Natural Gas, a wholly owned subsidiary of AGL Resources , provides retail natural gas sales and distribution services to more than 270,000 customers in southeast Virginia. For more information, visit http://www.virginianaturalgas.com/ .

About AGL Resources

AGL Resources , an Atlanta-based energy services company, serves more than 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 a 70 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 http://www.aglresources.com/ .

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SOURCE: AGL Resources Inc.