Chattanooga Gas Company, a subsidiary of AGL Resources Inc. , today filed a general rate case with the Tennessee Regulatory Authority that promotes conservation and energy efficiency.

In its first rate case petition in over three years, the company requested an increase of $2.6 million in response to increased operating costs, increased costs to finance capital investments, decreased depreciation expense due to proposed lower depreciation rates and decreased operating revenues primarily due to lower usage by customers and a decrease in Chattanooga Gas' customer growth rate.

The company also proposed to create an energy-efficiency program that would help customers lower their energy usage, save money and reduce their environmental footprint. The program would include:

  --  free programmable thermostats
  --  rebate programs to encourage customers to purchase high-efficiency
      appliances and equipment

  --  weatherization assistance for low-income customers

The average residential customer could save up to $280 annually by using programmable thermostats and installing high efficiency appliances.

Chattanooga Gas' proposal is based on a proven rate design model known as "decoupling" that separates the company's ability to make money from the amount of natural gas sold. By separating volume from recovery of fixed costs for providing service and related infrastructure, decoupling encourages all parties to pursue the benefits of energy efficiency and conservation.

"Decoupling aligns everyone's interests around good stewardship of our natural resources," said Steve Lindsey, vice president and general manager, Chattanooga Gas Company.

"We have proposed decoupled rates and new energy efficiency and conservation programs to provide customers an opportunity to reduce their total gas usage and monthly gas bills. As the commodity makes up 70% of our average residential customer's total bill, reducing commodity usage provides our customers the greatest opportunity to save money and conserve our natural resources. If approved by the TRA, our customers could see these conservation and rebate programs available to them as early as spring 2010," Lindsey said.

Finally, Lindsey said, "Decoupling would enable Chattanooga Gas to retain our ability to recover prudent costs so that we can extend services to new customers and continue to improve services to everyone while supporting the goals of conservation and energy efficiency. This could reduce the frequency of rate increases that may otherwise be required under a volumetric rate design."

To date, 20 states have approved various mechanisms for more than 39 local utilities to decouple their base revenue recoveries and customer throughput. Other states have adopted general policy statements favoring revenue decoupling - including Tennessee.

In June, Gov. Phil Bredesen signed a bill, which requires the Tennessee Regulatory Authority to develop energy conservation programs and to establish a ratemaking policy that seeks to align utility incentives with helping customers use energy more efficiently.

Currently, Chattanooga Gas customers are billed for the gas commodity and service to deliver it. The company does not include a mark-up on the cost of the gas, which accounts for about 70 percent of the total bill. Chattanooga Gas recovers costs based on an assumed level of gas use by customers. If natural gas customers use less than the assumed level, these rates do not allow the company to fully recover the cost to serve the customer. If the customer uses more gas than assumed, the company may recover more than the cost of providing service.

Under the new rate case petition, customers' rates would be adjusted annually based on actual consumption of natural gas rather than an assumed level of usage.

Chattanooga Gas' proposed base rate would increase the typical residential heating customer's bill by an average of $2.84 per month. However, this could be more than offset by the energy saving measures in the Company's proposed energy efficiency programs.

About Chattanooga Gas

Chattanooga Gas, a wholly owned subsidiary of AGL Resources , 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 , 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 a current 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 www.aglresources.com.

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SOURCE: Chattanooga Gas Company