2017 Mid Year Meeting Denver, CO Natural Gas Infrastructure Improvements - PHMSA and Infrastructure Trackers June 6, 2017

Atmos Energy Operations

National Awareness of Aging Infrastructure San Bruno, CA September 2010 Transmission PG&E Allentown, PA February 2011 Distribution (Cast Iron) UGI Sissonville, WV December 2012 Columbia Gas Pipeline Kansas City, MO February 2013 Distribution Missouri Gas Energy Ewing, NJ March 2014 PSE&G East Harlem, NY Consolidated Edison

Safety Landscape Transformation by Federal & State regulators: 2013 NARUC Resolution encouraging: State Commissions to consider adopting alternative rate recovery mechanisms to accelerate replacement of vulnerable pipelines. State and local agencies understand the need to replace aging infrastructure In 2011, 35% of the nations distribution mains were of pre-1970 vintage Pipeline safety and storage regulations continue to evolve Reactive Replacement (Monitor, repair, maintain) Proactive Replacement (Risk-based Prioritization)

Development of Replacement Programs Incumbent upon State Regulators to address proactive infrastructure renewal programs with utilities. Infrastructure characteristics vary for each utility. If any significant increase in capital investment is warranted, notable issues must be addressed: Regulatory lag under traditional ratemaking poses a barrier to incremental capital investments Seek alignment with stakeholders on: Pace of progress Reporting & regulatory review

Pipe Replacement Progress 75 -125 annually 450 -550 annually 105 103 470 470 96 374 346 295 50 50

Industry Identified Materials 7,500 6,400 1,100 5,000 miles replaced 1,500E miles replaced Bare Steel, Cast Iron and Vintage Plastics projected to be replaced within the next 20 years.

Remaining Miles of Cast Iron Mains 596 562 450-500 350-400 275-325 175-225 Cast Iron Mains to be Eliminated by 2023

US Monthly Utility Bills * Value of Natural Gas Provide safe and reliable natural gas to customers at a fair and reasonable price US Monthly Utility Bills * Natural Gas $43 Cable TV $82 Electricity $114 Water & Sewer $140 Mobile Phone $144 Atmos Energy Monthly Residential Bills Average Customer Bill Remains Affordable $58 $58 $43 * - For natural gas, Atmos Energy average residential bill for 2016. For all other utilities, these are national averages (citations available).

2017 Mid Year Meeting Denver, CO Natural Gas Infrastructure Improvements - PHMSA and Infrastructure Trackers June 6, 2017

2017 Mid Year Meeting Denver, CO Natural Gas Infrastructure Improvements - PHMSA and Infrastructure Trackers APPENDIX

Financial Impact Installation of PE Main in jurisdiction with These unrecovered costs = “Regulatory Lag” $1,000,000 Investment Revenues Return on rate base = $92K Coverage of $44K expenses Year 1 2 3 4 $32K $44K $44K $44K Expenses Installation of PE Main in jurisdiction with Next Rate Case Result in Year 4 Page 12