Distribution Operations: Progress and Possibilities

Distribution Operations:Progress and Possibilities

Kevin P. MaddenExecutive Vice PresidentDistribution and Pipeline Operations

2003 Analyst/Investor Conference 2

What We Told You to Expect in 2003

• Stability through regulatory compact

• Managing capital deployment

• Working to achieve authorized returns

• Continuing to improve service


Stability Through Regulatory Compact

2003• No rate cases• All issues settled• Stable landscape

NO HEADLINES …


11.00

11.08

10.90

11.38

11.068.97

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Perc

ent

AGLC VNG CGC

Distribution Operations Projected ROE 12 Months Ending 12/ 31/ 03

Authorized (1) Actual

Authorized Versus Actual Returns

12.00 11.40


The Challenges of Managing Capital

• Managing costs after years of reductions

• Accretive customer growth

• Retention (minimizing underutilized assets)

• Managing program results


Managing Capital Deployment

$0

$90

$180

$270

Environmental Response Cost


Pipeline Replacement

Program


Program

AGLC AGLC

VNG

VNG



Program

AGLC

VNG

CGC

Business Technology

CGC

CGC

$ in Millions

Business Technology

Business Technology

Distribution Distribution

Distribution

FY 02 Actual FY 03 Expected FY 04 Preliminary Budget

$171$158

$257Pivotal Propane


Managing Our Average Net Cost Per New Meter Set

$1,132$1,070

$500

$600

$700

$800

$900

$1,000

$1,100

$1,200

2002 Projected 2003

5% Reduction


Managing Our Average Net Cost Per New Meter Set

$1,256

$1,047$1,190 $1,177

0

300

600

900

1,200

1,500

AGLC/CGC VNG

2002 2003


Managing Customer Growth (All Utilities Combined)

Projected 2003

2002

2001

2000

1999

1998

1997

1996

1995


Our Net Growth Rate Exceeds Comparable-Sized Companies

Percent Growth

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

ENTEX

NORTHERN IL

LINOIS

GAS

AGL RESOURCES

SOUTHERN C

ALIFORNIA

GAS

TXU G

AS DIS

TRIB

UTION

PACIFIC

GAS &

ELE

CTRIC

DOMIN

ION E

AST O

HIO

COLUM

BIA G

AS OF

OHIO

MIC

HCON

PUBLIC S

ERVICE E

LEC &

GAS

AGL net customer growth 11% greater AGL net customer growth 11% greater than the national average for utilities than the national average for utilities

with >1 million customers*with >1 million customers*

AGL net customer growth 11% greater AGL net customer growth 11% greater than the national average for utilities than the national average for utilities

with >1 million customers*with >1 million customers*

*Sourced from comparable companies via US DOT 2001-2002


This Is The Place To Be

• We could not ask for a better place to do business

• Net in-migration to the Southeast and Georgia continues to be strong

Growing Service Territory

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2002 2005 2015 2025

Po

pu

lati

on

Tennessee Virginia Georgia

Source: US Census Bureau


Continuing To Add New Meter Sets

0

10,000

20,000

30,000

40,000

50,000

60,000

2002 Projected 2003 Projected 2004

AGLC VNG CGC

7% Growth

7% Growth


Our Customer Profile In Each Utility

Commercial Firm9%

Residential Firm91%

Industrial Firm0.11% Interruptible

0.04%

Residential Firm92%

Commercial Firm8%

Interruptible0.06%

Industrial Firm0.04%

Residential Firm86%

Commercial Firm14%

Interruptible0.11%

Industrial Firm0.35%

AGLCAGLC

VNGVNGVNGVNG

CGCCGCCGCCGC


Retaining Customers ProvidesThe Greatest Value

PartnershipsWith HVACDealers and

Plumbers

PartnershipsWith HVACDealers and

Plumbers

Consumer Appliance Rebate Programs

Consumer Appliance Rebate Programs

RegulatoryPricing Strategies

RegulatoryPricing Strategies

Co-MarketingInitiatives

Co-MarketingInitiatives

Multifamily ConversionPrograms

Multifamily ConversionPrograms

New Products andServices

New Products andServices

Realtor ChannelsRealtor

Channels

PartnershipsWith Appliance

Retailers

PartnershipsWith Appliance

Retailers

Pieces of the Retention Puzzle

Customer CareCustomer Care

CommercialRetention

CommercialRetention


Retention of Customers in GA, TN, VA

38%

0%

10%

20%

30%

40%

50%

2003 vs. 2002

Increase in Customer Retention

1 817

2326

36

0

10

20

30

40

50

in t

housa

nds

Sept. 02Dec. 02Mar. 03

Jun. 03Aug. 03Nov. 03

Regulated Provider Participation in Georgia

Consumer Advocacy Marketing Campaigns

• Consumers’ Gas Bill of Rights (GA)

• Consumer Appliance Rebate Program (GA, TN)

• Appliance Financing (GA, TN, VA)

• HVAC Dealer Program (GA, VA)

Measure of Success

•36.5K regulated provider participation

•2,000 rebates redeemed in 15 weeks; 60% redeemed for gas furnaces – “the last burner tip to go”

•1,500 gas furnaces replacements financed

•4,400 gas units replaced in homes


Pipeline Replacement Program:A Source and Use of Capital

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$ in

Mill

ion

s

2003 2004 2005 2006 2007 2008

Cost Recovery Revenue

In FY 2009, an estimated $422 million will be transferred to rate baseIn FY 2009, an estimated $422 million will be transferred to rate baseIn FY 2009, an estimated $422 million will be transferred to rate baseIn FY 2009, an estimated $422 million will be transferred to rate base


Environmental Recovery Program

0

5

10

15

20

25

30

35

40

45

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$ in M

illions

Annual Costs - High End of Range

Annual Costs Expected

Recovery/ Revenue

Calendar Year


Cash generated from the pipeline replacement and environmental recovery

programs combined

$0

$20

$40

$60

$80

$ in

Mill

ion

s

2003 2004 2005 2006 2007 2008 2009


$213.2

$224.4

$232.8

200

205

210

215

220

225

230

235

$ in Millions

2001 2002 Projected 2003

We Deliver Financial Results

5% Growth

4% Growth

EBITUtility Operations


We Also Manage O&M per Customer

$136 $134$134

$198

$176 $175

$199

$193 $194

$100

$110

$120

$130

$140

$150

$160

$170

$180

$190

$200

AGLC VNG CGC

2001

2002

2003 (Projected)


906 920 955

500

600

700

800

900

1,000

2001 2002 Estimated 2003

Customers per Employee

Improving Workforce Efficiency

4% Improvement

2% Improvement


Setting The Standard For Our Peers

Best Performer Lowest Performer

AG

L R

esou

rces

Based on the 2003 American Gas Association Best Practices Benchmarking Survey exclusive of outlying data

Customers Per Employee

• Technology• Collective Bargaining• Performance Management• Incentive Compensation

1,410

250

1,382


Improvement in Services

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

Min

ute

s

2003 Georgia ServiceStandard

Exceeding The Standard for Average Leak Response Time

92%

93%

94%

95%

96%

97%

2002 2003

Improved Appointment Attainment


What To Expect In 2004

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

2004

Customer Growth for 2004Chattanooga Atlanta Virginia

Where Does It Come From?• New Business Acquisition

– Residential: 3+ burner tip strategy, multifamily complexes– Commercial: Process load or 2 tips, architects & engineers

as key decision influencers

• Retention– Gas Partnerships: retailers, HVAC dealers, plumbers, appliance

vendors, realtors, marketers– Consumer Advocacy: campaigns for “at risk” groups

1%

1.5%

3%


What To Expect In 2004Lowered Cost per New Meter and Greater Investment in Rate Base

$1,070

$1,017

$500

$600

$700

$800

$900

$1,000

$1,100

$1,200

Projected 2003 Projected 2004


Pipeline Replacement Program

AGLC

VNG

Business TechnologyCGC

Pivotal Propane

$0

$90

$180

$270

A 5% or greater A 5% or greater reduction in cost per reduction in cost per

new meternew meter

A 5% or greater A 5% or greater reduction in cost per reduction in cost per

new meternew meter

Distribution

Up to $257 million in

projected capital expenditures

Up to $257 million in

projected capital expenditures


Increased Productivity

2% Improvement

500550600650700750800850900950

1000

2003 Projected 2004

Customers Per Employee

Technology initiatives in 2004:Technology initiatives in 2004:GPS, Marketer Self-Serve, Work ManagementGPS, Marketer Self-Serve, Work Management

Technology initiatives in 2004:Technology initiatives in 2004:GPS, Marketer Self-Serve, Work ManagementGPS, Marketer Self-Serve, Work Management


2004: Focus on All Components of Cost Structure

AGLC Distribution

Charge21%

AGLC Riders3%

Marketers Commodity

Charge58%

Marketers Service Charge

8%

Marketers Interstate

Transportation Charge10%

Interstate Transportation

Charge17%

Commodity Charge53%

CGC Distribution

Charge30%

AGLCAGLC

CGCCGC

VNGVNG VNG Distribution

Charge38%

Commodity Charge50%

Interstate Transportation

Charge12%


2004 Goals

• Sustain superior performance• Focus on interstate transportation

realignment• Market to retain• Drive incremental productivity through

technology

Distribution Operations: Progress and Possibilities

Documents

Transcript of Distribution Operations: Progress and Possibilities