News Release

Huntsville Utilities Announces That Natural Gas Rates Will Increase By 45%

September 27, 2005

The Huntsville Utilities' Natural Gas Board today approved a rate increase for natural gas for the month of October. The rates for Huntsville Utilities' residential customers will be increased by four dollars and fifty cents ($4.50) for a thousand cubic feet of gas in an effort to bring customer rates in line with the market prices that Huntsville Utilities pays for natural gas.

The new rate for natural gas will be $14.45 per one thousand cubic feet (Mcf) and will take effect on meter readings beginning today. The current rate is $9.95 per Mcf.

"This rate is only for the month of October and utility officials will adjust rates depending on the market price of gas," stated utility spokesman Bill Yell. If the market price goes down, we will lower the rates," Yell added.

Natural gas prices are now at the highest level in history and there appears minimal short-term relief in sight. Natural gas is a commodity traded on the Futures Market of the New York Mercantile Exchange ("NYMEX"). Pricing on NYMEX directly influences the price paid for natural gas by Huntsville Utilities. The cost customers pay for natural gas reflects what Huntsville Utilities pays for gas supplies it obtains from the gas production areas along the Gulf coast. Huntsville Utilities does not earn a profit on the cost of the gas purchased to meet system requirements.

The market price for natural gas remains at all-time historic highs for several reasons.

Increased demand for natural gas is one cause. The benefits of natural gas have long made it a fuel of choice for residential space heating, as well as for commercial and industrial processing. Industrial consumption is currently increasing and projections indicate continued growth. Over the past five years, natural gas has become the primary fuel for new electric generation facilities.

While natural gas consumption is increasing, U.S. natural gas production is decreasing. In 2004 U.S. production decreased when compared to the prior year and projections for this year indicate another decrease.

Hurricane activity in the Gulf of Mexico has also created short-term supply disruptions. Nearly 100% of natural gas production was halted for a period of time during Hurricane Katrina in August. Some of that production is still offline. Hurricane Rita's affect on natural gas production facilities is still unknown. Before Katrina, some natural gas production had just recovered for Hurricane Ivan that hit the Gulf Coast last September.

"We realize that some of our customers will have a difficult time paying their gas bills this winter. We will work with each customer and are looking at extending payment options to help customers this winter," Yell said.

Huntsville Utilities gas system is the largest public gas system in Alabama serving over 44,000 customers in Huntsville and Madison County.