Louisiana Public Service Commission Technical Conference: Natural Gas Hedging for the Investor Owned Utilities July 26, 2013

AGENDA I Opening Remarks by Commissioners Present II Review by Commissioner Holloway of his June 26, 2013 directive regarding long- term hedging in addition to the public interest of rate payers, clear definition of fixed/all in price, and his long term objectives. III Regulatory Approval Process A. LPSC Staff B. American Natural Gas Alliance: Michelle Bloodworth--overview of regulatory research on long-term contracts C. Anadarko: John Bretz-- overview of Colorado regulatory experience in long- term contracts D. Devon Energy: A.J. Ferate--overview of Oklahoma regulatory experience in long-term contracts IV Questions for/Comments by Utilities for Suppliers of Natural Gas A. Entergy B. Cleco C. SWEPCO D. Atmos E. Centerpoint V Questions for/Comments by Gas Suppliers for Utilities VI Summary

Commissioner Clyde Holloway: Directive of June 26, All investor owned utilities shall have an affirmative duty to respond to any firm hedging offers for 20% of its annual gas purchases. These offers shall include five, seven, ten and fifteen year hedging proposals. Utilities will report the results of such offers to commissioners prior to or on September 18th, 2013, date of the Business and Executive Session.

Public Interest Is long-term hedging at a fixed price in the best interest of rate payers? The Commission has a responsibility to study and take executive action(s) to stabilize a portion of ratepayers monthly utility bills by mitigating risks.

Clear Definition of Fixed/All in Price No escalator or pricing related to index ALL cost related to hedging proposals must be transparent Examples of related cost(s) that must be included in the fixed/all in/totally inclusive price: 1. Any capital cost/ROE worked into the base rate 2. Transportation Cost (Example: pipeline)

Regulatory Approval Need for utilities to be protected in future fuel audits Need for offers/proposals submitted for approval to be expedited given the time-sensitive nature of price changes that occur during the hedging. Commission may need to develop a streamlined process for hedging offers.

Types/Various Forms of Hedging What types of natural gas products/hedging formats are currently available/possible to Louisiana utilities?

Questions for Gas Suppliers Are suppliers willing to waive requirements to post credit for a fixed price supply contract? Will suppliers enter into a true fixed price contract? No indexing, etc. What is the maximum term for a contract a supplier is willing to commit to on a fixed price contract? If the supplier fails to deliver, thereby increasing costs to the utility and its customers, what compensation is the supplier willing to pay? What assurances are the suppliers willing to provide that they will deliver said product? Are suppliers willing to make firm arrangements to deliver gas to one or more utility plants? Can the suppliers vary the rate of hourly production to follow the load of the utility? Will the supplier absorb the cost of flexible deliveries? Will such deliverability issues be factored in when formulating the firm cost?

Questions for Utilities What type of gas supply products does the utility require to meet its fuel needs? What internal approvals are needed? Timeframe for such approvals, especially if LPSC certifies the long- term hedging purchase? Does pipeline capacity exist to support long –term contracts? Do you have natural gas storage facilities within the state of Louisiana? What would be the effect of long-term hedging of 20% of the utilitys annual gas needs?