News Release

HU Reduces Natural Gas Rates for the Second Time This Year

October 7, 2009

Huntsville Utilities announced today a rate decrease for all natural gas customers. The rates for Huntsville Utilities’ residential customers are being lowered by 5.8% from $12.44 to $11.72 per one thousand cubic feet (1,000 cf). The new rate will be effective on November bills.

This will be the second rate reduction this year by Huntsville Utilities. In April gas rates were also lowered by 10% from $13.82 to the current rate of $12.44 per one thousand cubic feet.

There will be an increase in the monthly customer charge from the current $2.50 to $4.50. This increase was based on a recent cost of service study the Utility recently had conducted by an industry consultant.

Even with the increase of the customer charge, the combination of the two rate decreases this year will result in the average gas customer seeing their monthly bill reduced by nearly $20 a month compared to what they paid this past winter.

During the peak heating months of December through February, the average Utilities’ gas customer uses 10,000 cubic feet of gas. Last winter they would have a bill of $140.70. Under the new rate structure their bill would be $121.70 which includes the $4.50 monthly customer charge. The average usage of 10,000 cubic feet per month is based on a 1,800 square foot house using natural gas for heating and water heating.

Rates for other rate classifications including commercial and industrial customers will also see rate reductions. Transportation only customers will see an increase in their transportation costs.

The rate decrease will take affect on meter readings on and after October 27.

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 has three components; the actual cost of the physical natural gas, the cost to transport that gas to Huntsville and the cost of operating the gas distribution system to deliver the gas to the customer.

Huntsville Utilities purchases gas supplies from the gas production areas along the Gulf Coast and then has it transported through pipelines from the Gulf to Huntsville. Huntsville Utilities does not earn a profit on the cost of the gas purchased to meet system requirements.

This rate decrease comes at the same time that one of the natural gas pipelines that transports gas to Huntsville, Southern Natural Gas, has increased rates to Huntsville by 17%. This will increase the transportation costs of gas to Huntsville by just over $800,000.

The Huntsville Utilities gas system is the largest publicly owned gas system in Alabama serving over 47,000 customers in Huntsville and Madison County.