Regulated Utilities, Reliable Returns

Pictured Above: NASA's mission is to pioneer future advances in space exploration, scientific discovery and aeronautics research. Natural gas, supplied by Virginia Natural Gas, helps enable the NASA Langley Research Center in Hampton, Virginia, to conduct wind tunnel experiments. Additionally, the Kennedy Space Center in Florida depends on natural gas supplied by Florida City Gas to control humidity in sensitive processing areas.

A chief advantage of owning and operating regulated utility companies, particularly in our current economic climate, is that we can maintain a relatively high degree of certainty around expectations. This means we have the opportunity to earn reliable returns. The challenges we face in our utility businesses are much the same year in and year out – managing costs, competing for capital for our infrastructure investments and competing for customers. All states served by the company's utilities also require some level of commitment to energy-efficient initiatives and environmental stewardship. We have worked hand-in-hand with the states to promote conservation and the best uses for natural gas.

Over the past several years, the company's utilities have been fulfilling their long-term commitments to rate freezes, which begin expiring in 2009. As these rate cases come up for renewal, we will be looking at rate reforms that encourage conservation and "decoupling." In traditional rate designs, our utilities' recovery of their fixed customer service costs are tied to customer usage. Separating or decoupling the recovery of these fixed costs from the natural gas deliveries will align the interests of our customers and utilities by encouraging energy conservation and adding more stability to our utilities' operating margins. We will work to achieve fair prices and fair treatment for both our company and our customers.

As the following chart indicates, a significant percentage of our consolidated earnings is derived from our regulated utilities and from the sale of natural gas to end-use customers, primarily in Georgia, through our retail energy operations segment. This statistic is significant as it represents the portion of our earnings directly resulting from supplying natural gas to retail customers.

* Earnings before interest and taxes (EBIT) should not be considered
an alternative to, or more meaningful measurement than, operating
income or net income as determined in accordance with accounting
principles generally accepted in the United States (GAAP). For a
reconciliation of EBIT to GAAP, see Item 7 of our Form 10-K included
with this report.

 

Neither NASA, Kennedy Space Center, NASA Langley Research Center, nor the United States Government endorses AGL Resources or any other private enterprise. Reference to NASA and the space shuttle photographis not intended to imply such endorsement.