State of Ohio Natural Gas Program / Natural Gas 101

1. State of Ohio Natural Gas Program / Natural Gas 101 Ohio Natural Gas Program and Industry Terminology

2. Introduction of The E Group Ohio Natural Gas Program and Industry Terminology

3. The E Group A National Provider of Energy Management Services • Information management • Energy consulting, procurement and rate audits • Risk management • Supply and demand-side energy management strategies Ohio Natural Gas Program and Industry Terminology

4. Organizational Chart FirstEnergy Corp. (NYSE: FE) A Public Utility Holding Company $12B Market Cap $34B Assets FirstEnergy Utilities FirstEnergy Generation Competitive Unit of FE FirstEnergy Solutions The E Group Ohio Natural Gas Program and Industry Terminology

5. Natural Gas 101 Ohio Natural Gas Program and Industry Terminology

6. What is Natural Gas? • Created by organic matter decaying over millions of years, creating hydrocarbons. • Hydrocarbons existed between sand and porous rock, eventually forming natural gas and liquid petroleum. • Primary component is Methane (CH4). Ohio Natural Gas Program and Industry Terminology

7. Gas Measurements • CCF - abbreviation for one hundred cubic feet of gas • MCF - abbreviation for one thousand cubic feet of gas • BCF - abbreviation for billion cubic feet of gas • Decatherm (Dth) - ten therms or one million btu, the approximate heat content of one thousand cubic feet of gas; (1 therm is equal to 100,000 Btu) • MMBtu - Million British Thermal Units; (1MMBtu = 1 Dth) Ohio Natural Gas Program and Industry Terminology

8. MCF versus DTH - Conversion Price Dth x Btu = MCF MCF / Btu = Dth Volume Dth / Btu = MCF MCF x Btu = Dth Ohio Natural Gas Program and Industry Terminology

9. Roles in the Marketplace • Producer - one who owns or leases wells producing oil or gas • Transmission Pipeline – pipeline installed to transmit gas from a source or sources of supply to one or more distribution companies. • Interstate Pipeline - a company that transports natural gas across state lines. Governed by Federal Energy Regulatory Commission (FERC) • Intrastate Pipeline - a company that transports gas within one state’s boundaries • Distribution Pipeline - LDC - a natural gas utility that sells gas directly to consumers under jurisdiction of a state regulatory commission • Local Distribution Company (LDC) - a company that buys gas, then distributes and resells it to residential, commercial, and industrial customers. • Marketer - a company involved in the business of purchasing and reselling gas Ohio Natural Gas Program and Industry Terminology

10. Industry Terms • Wellhead – point where gas is extracted and measured • Gathering Lines- pipelines that connect wells or meters to a transmission line • City Gate - the site where a distribution utility company receives and measures gas from a pipeline company. • Transportation - the movement of gas for third parties through pipeline facilities for a fee • Fuel Loss / Fuel Inverse / Retainage - a small percentage of gas kept by the transporter for use primarily as compressor fuel. • GCR – Gas Cost Recovery Rate - the cost of gas that a LDC buys to serve its customers. Ohio Natural Gas Program and Industry Terminology

11. Natural Gas Futures • Energy Related Futures Exchanges: • The “New York Mercantile Exchange” (“NYMEX”) -Natural Gas @ Henry Hub • A NYMEX Natural Gas Contract Unit is 10,000 MMBtu delivered over a monthly period • Delivery Point is Henry Hub, LA. Seller moves gas through hub & pays hub fee. • The NYMEX is trading through 2020 although there is not a lot of liquidity beyond three years at this point • Trading terminates 3 business days prior to the deliver month Ohio Natural Gas Program and Industry Terminology

12. Basis Basis - the differential that exists any time between the futures or forward price for a given commodity and the comparable cash or spot price for the commodity. Basis can reflect different time periods, product qualities, or locations. Ohio Natural Gas Program and Industry Terminology

13. Burner Tip Cost Components Ohio Natural Gas Program and Industry Terminology

14. State of Ohio Natural Gas Program Ohio Natural Gas Program and Industry Terminology

15. Overview • A procurement initiative that takes advantage of the buying power of many state accounts in order to save money on gas bills • Deregulation allows purchasing gas from third-party suppliers • State program in place since mid-1990’s • Administered through DAS • The E Group began administering the program in May 2003 Ohio Natural Gas Program and Industry Terminology

16. Successes! • Over $27 million saved FY 2004 through 2008. • Average savings of 11% of spend compared to applicable utility rates • Over $50 million annual spend • Over 4,400,000 mcf/yr. • There are many large, reputable suppliers seeking the State’s gas business! Ohio Natural Gas Program and Industry Terminology

17. Current Enrollment • 149 Entities • 21 State Agencies • 128 Coops (NOTE: Many more individual sites since most entities are made up of several different locations) • 1,229 Accounts • 178 Transport • 1,051 Choice Ohio Natural Gas Program and Industry Terminology

18. Coverage • Work behind the 5 major utilities in Ohio • Columbia Gas of Ohio (“COH”) • Dominion East Ohio Gas (“DEO”) • Dominion West Ohio Gas (“DWO”) • Duke Energy (“Duke”) • Vectren Energy Delivery of Ohio (“VEDO”) Ohio Natural Gas Program and Industry Terminology

19. Process - What We Do • Determine best utility delivery rate schedule • Enroll facility in program • Select suppliers through Request for Proposal (“RFP”)process • Procure gas • Pay the bills • Audit monthly supplier invoices • Calculate savings • Market the program Ohio Natural Gas Program and Industry Terminology

20. Selecting Suppliers • RFP language • Project pool volumes • Supplier analysis • Negotiate contracts • Offer Analysis • Provide analyses and recommendations to State • Select suppliers Ohio Natural Gas Program and Industry Terminology

21. Gas Procurement / Risk Strategy • Purchasing basis through RFP process • Fuel, shrink, supplier adders • Setting commodity price • Follow risk strategy • Trigger volumes in layers (not buying all at once) • Driven by NYMEX • Local utility still involved for gas delivery and customer service Ohio Natural Gas Program and Industry Terminology

22. Managing Price Volatility • Market monitoring and forecasting • Follow natural gas fundamentals, including amount of natural gas in storage, number of operating natural gas rigs (rig count) and weather forecasts. • Analyze price chart technicals and determine support and resistance levels. • Follow the NYMEX strip prices and individual monthly prices. Ohio Natural Gas Program and Industry Terminology

23. 12-Month NYMEX Strip Prices Ohio Natural Gas Program and Industry Terminology

24. State Price Structures Per “Pool” General Transportation Services (“GTS”) refers to large consuming sites. Choice refers to small consuming sites. COH GTS = Layered NYMEX Pricing COH Choice = Layered NYMEX Pricing DEO GTS = Layered NYMEX Pricing DEO Choice = Guaranteed Savings Offer DWO GTS = Layered NYMEX Pricing DWO Choice = No Program Available at This Time Duke GTS = Layered NYMEX Pricing Duke Choice = No Program Available at This Time VEDO GTS = Layered NYMEX Pricing VEDO Choice = Guaranteed Savings Offer Ohio Natural Gas Program and Industry Terminology

25. Bill Payment • Bills paid through central agent – utility bill payment system • Transport Accts: 2 invoices - 1) utility, 2) supplier • Process • Setup of account in bill payment system • Bill received at central agent • Bill data keyed into system • Bill validated (run through various criteria) prior to payment • Check issued for payment to vendor • Funding request to customer made via EDI or ACH/wire transfer Ohio Natural Gas Program and Industry Terminology

26. Bill Payment Site View Screen • Data, payment info, and bill image posted on bill payment website Ohio Natural Gas Program and Industry Terminology

27. Bill Payment (continued) • Benefits • Eliminates vendor late fees • Eliminates paper invoices and costs associated with processing them (estimated at $40 per invoice) • Funding requests made electronically • Web access to all natural gas bill information • Bill validation • Natural development of database for auditing, strategy and procurement activities • Enables users to quickly produce reports or graphs on historic usage or dollar spend Ohio Natural Gas Program and Industry Terminology

28. Criteria for Joining State Program • Must be served by DEO, DWO, COH, Duke, or VEDO systems • Current third party supply contracts must be terminated before joining the program • Coop membership Ohio Natural Gas Program and Industry Terminology

29. Enrollment • Enrollment Inquiry Form • Most Recent Bill Copies • Memorandum of Understanding (MOU) • Annual renewals • No fee to join • All program costs are included in the cost of natural gas Ohio Natural Gas Program and Industry Terminology

30. Program Benefits! • Could save 5% to 30% on gas bills compared to applicable utility rates (historical results) • Allows you to outsource your gas management and concentrate on your core business • Electronic bill payment reduces paperwork and utility late fees • Trained, skilled personnel available to answer questionsand act as liaison between end user and Supplier and/or utility Ohio Natural Gas Program and Industry Terminology

31. State of Ohio Natural Gas Program Team Jim Hunley - DAS, Procurement Supervisor Nikki Erb – DAS, Administration Eileen Mikkelsen - The E Group, Director Dave Miles – The E Group, Account Manager Stephanie Everhart - The E Group, Gas Management Rich Mason - The E Group, Bill Payment Ohio Natural Gas Program and Industry Terminology