The Commonwealth of Virginia 2016 State Contracts Meeting – Compass Energy Placeholder

History and Details The Commonwealth of Virginia State Natural Gas Contract Compass Energy awarded in April 2010 Goes through at least June Began supplying in July 2010 almost 6 years ago Supply small and larger meters on CGV, VNG, City of Richmond, Atmos Energy, Washington Gas, Roanoke Gas. Contract pricing is based on a cost formula that changes with usage, length of term, utility, market area, other factors, plus our adder of $.028 per dth. Longest term for pricing is 30 months into the future.

Average Delivered Cost of Gas The Commonwealth of Virginia FY Averages (per dth) FY 2010$5.977 FY 2011$5.915 FY 2012$4.699 FY 2013$5.100 FY 2014$4.669 FY 2015$4.255 (to date/est) FY 2016$3.760 (locked/est) FY 2017$3.760 (locked/est)

Winter of 2016 The Commonwealth of Virginia Winter of 2016 – What Winter? El Nino Effect – Powerful El Nino Historical Winter (Dec- Feb) was the warmest in recorded history (121 years by NOAA). A full 5 degrees F higher than the 30 year average. Locally, December 2015 was 10.7 degrees F higher than the 30 year average.

Utility Restrictions The Commonwealth of Virginia Winter of 2016 OFO/BSRs are called by utilities to conform to upstream pipeline requirements and to protect storage. The utility requires the customer to match daily usage or be penalized. The options are to use alternate fuel, curtail load, or buy additional daily gas needed at market price for that day avoiding penalty. Commonwealth of VA accounts did very well this year using alternate fuels and curtailing load on the BSR/OFO/curtailment days.

Pipeline and Utility Restrictions The Commonwealth of Virginia Winter of 2016 VNG – a couple matching day restrictions Roanoke Gas – no restrictions City of Richmond – no restrictions however daily balancing Atmos Energy – no Atmos restrictions Washington Gas – a couple utility interruptions/curtailments on primarily first few levels of interruptible transport customers Columbia Gas of Virginia – 31 utility-issued balancing service restriction days. However, 16 of those were for warm weather BSRs in Nov, Dec, and March. 15 cold weather BSR days in Jan and Feb (34 cold BSR days in winter of 2014, 30 cold BSR days in winter of 2015)

Shale Yes!

The Commonwealth of Virginia

Shale Production in the US The Commonwealth of Virginia

Marcellus Shale The Commonwealth of Virginia

New Electricity Generation The Commonwealth of Virginia

New Virginia Interstate Pipeline Projects The Commonwealth of Virginia Virginia suffers from a severe lack of interstate pipeline capacity and access to shale gas resources resulting in high winter basis costs and high winter daily prices. We have plenty of gas available in Marcellus, but no way to get it to Virginia. The winter of is the earliest any of these projects would come on line.

Nymex Prices in the Past The Commonwealth of Virginia

Prices Going Forward Right Now The Commonwealth of Virginia Future calendar year Nymex strip prices have rebounded from lows. Where will they go now?

Storage: Injection Season Begins The Commonwealth of Virginia Natural gas stocks end heating season at record high level Storage levels will keep a cap on prices through this summer Late summer temperatures could shrink the current surplus

The Commonwealth of Virginia Summer temperatures may hinge on how fast the current El Nino weakens. Forecast models show neutral conditions by late May or June, with some models showing La Nina conditions by the second half of summer. La Nina conditions tend to support warmer summer temperatures, especially for the South. Summer 2016 Temps

Supply - Fundamentals The Commonwealth of Virginia While rigs have declined dramatically in the past several years, production has grown steadily, indicating that drilling has become more efficient. Production data have only recently begun to show some signs of flattening after hitting a record high in September 2015.production has grown steadilydrilling has become more efficient

Demand - Fundamentals The Commonwealth of Virginia Demand Total natural gas demand over the next 5 years is expected to increase by almost 20% LNG exports represent a large portion of this increased gas demand, followed by exports to Mexico, industrial and power generation growth.

Nymex Prices Going Forward The Commonwealth of Virginia Five Year Nymex Forecasts With gas demand increasing and production at best leveling off, most experts see natural gas prices increasing over the next 5 years. Prices will need to go up to spur the production growth needed to meet future demand.

Basis Pricing Going Forward The Commonwealth of Virginia Basis/Transportation Lack of interstate pipeline capacity into Virginia and the Eastern seaboard. Caused by massive shift away from coal to natural gas fired electricity generation and industrial production and lack of proactive pipeline projects. Results in constrained pipeline space during high demand winter months And means high winter (Dec-Feb) basis prices and high winter daily prices during peak demand. ACP and other pipe projects desperately needed.

Questions? The Commonwealth of Virginia To find out more specifics about the state natural gas contract, contact: over the past year due to short term weather shocks. Barry M. Koski (804)

Constellation: Who, What and Where we Serve Natural Gas More than 700 Bcf load in C&I markets^ Retail Power More than 130 TWh C&I load under contract^ Energy Efficiency 190,600MWh conserved by customers in 2014 Solar 275 MW customer sited, completed or under construction Distributed Generation 165MW customer sited, completed or under construction about 1.7 million unique residential customers. We serve approximately 2 million customers, including 2/3 of the Fortune 100, more than 220,000 Business & and Public Sector customers, We serve Power & Natural Gas across all competitive markets: *2015 data