1. Natural Gas Interchangeability Integrating supply diversity and end-use predictability Jennifer Baber Deegan Federal Regulatory Affairs Washington Gas Light Company April 28, 2004

2. Washington Gas Light Company (WGL) Natural gas local distribution company serving Washington D.C. and the surrounding metropolitan region in Maryland and Virginia 970,000 customers; 90% residential 1.7 Bcf peak day requirement; 100 MDth per day base load 20+ gate stations connect WGL with four upstream interstate natural gas pipelines

3. Gate Stations on CPLNG pipeline 1 Centreville 2 White Plains 3 Gardiner Road 4 Chalk Point 5 Prince Frederick 6 Patuxent Cove Point 1 6 3 4 5 2 WGL has 6 Direct-Connect Gate Stations on the Cove Point LNG pipeline - the Transco, DTI & TCO Gate Stations are downstream of Cove Point Washington Gas System Profile

4. Dominion Cove Point LNG §January 2001 Reactivation Application 7.8 Bcf LNG Storage Capacity 1 Bcf/day Sendout Capacity Reactivation Summer 2003 §Washington Gas protest Natural gas interchangeability concerns Lack of competitive alternatives to LNG imports §FERC reactivation authorization, but without quality ranges desired by Dominion Cove Point and LNG importers

5. Dominion Cove Point Initial Gas Quality Criteria §Maximum high heating value (HHV) of LNG received: 1138 Btu/scf(dry basis) At Cove Points option, higher HHV permitted to be received But only if can be modified to meet sendout criteria (below) §Maximum HHV of vaporized LNG sent out: 1100 Btu/scf Prior to sendout, inject with nitrogen as necessary to lower HHV to 1100 Btu/scf Maximum nitrogen in sendout gas: 4.0% §Specific composition limits typical of domestic pipeline tariffs (e.g. maximum 1.0% CO 2 ; 0.02% O 2 )

6. WGL Expected high Btu of LNG relative to WGL history of traditional supply WGL More heavy hydrocarbons can produce undesirable combustion characteristics Carbon monoxide production Reduced appliance life Environmental compliance implications Source: TIAX Interchangeability Assessment for WGLs Service Territory July 7, 2003 Final Report (Cove Point LNG Docket No. CP01-76) Btu Interchangeability

7. Potential Changes in Combustion with the introduction of LNG § Thermal effects Greater or lesser heat input compared to rating Potential for thermal stress §Lifting Gases with higher inerts have lower average flame velocity May become less than velocity of gas through burner ports -- flame will lift §Flashback Gases with higher flame velocity (e.g. hydrogen) May burn back through ports into burner Normal Lifting

8. Potential Changes in Combustion with the introduction of LNG §Yellow-tipping Higher heating value gases need more primary air Lower ratio of primary air to fuel leads to flame yellowing and elongation, impingement on surfaces, sooting §Incomplete combustion Can occur alone or in combination with the above Excessive production of carbon monoxide Particularly critical with unvented appliances (cooking, fireplaces, heaters) Yellow-tipping

9. Maintaining end-use predictability and supply diversity §WGL seven step approach focused on field and lab testing §Provided a method to manage diversity in LNG sources with a minimum investment in blending and dilution facilities

10. WGL Interchangeability Approach 1. Identify Historical Range Variation can serve as a benchmark for tolerances Evaluate length of time of sustained extreme conditions Evaluate impact of other resources on- system and downstream 2. Determine the appliance characteristics of the affected area 3. Select representative appliances for testing

11. 4. Establish baseline appliance performance criteria 5. Lab test actual consumer appliances from impacted area and new appliances Rates of CO production Yellow-tipping characteristics Sooting potential Lifting tendencies 6. Identify supply and dilution combinations that produce results comparable to the baseline WGL Interchangeability Approach 7. Translate supply sources molecular components and dilution combinations into quality criteria

12. Dominion Cove Point LNG Interchangeability Settlement §5-Party Agreement between WGL, Dominion Cove Point LNG and LNG importers §Interchangeability study conducted based on an agreed-upon methodology Provided information to all parties that a wider range of interchangeability results can be incorporated §Competitive alternative provided (Cove Point East CP03-74) §Interchangeability limits for delivery to WGL incorporated into the Dominion Cove Point LNG tariff Yellow-tipping Lifting Incomplete Combustion Heating Value (Btu) §Natural gas quality monitoring capability established Monitor hourly Remedy within 3 hrs

13. Natural Gas Quality & Interchangeability Quality - Merchantable; operator flexibility Btu range Objectionable Properties Particles, liquid or solid matter Hydrogen Sulfide Sulfur Nitrogen Carbon Dioxide Oxygen Harmful Contaminants Bacteria or bacterial agent Molecular Structure Hydrocarbon Dew Point (HDP) Interchangeability - Extent to which a substitute gas can replace the gas normally used and produce similar combustion characteristics

14. Lessons Learned Local, historical natural gas characteristics are the starting point for developing interchangeability indices because every market developed differently Heating value is not the sole factor for determining interchangeability; the ratio of heavier hydrocarbons to methane must be considered Current pipeline tariff gas quality ranges/limits do not necessarily reflect the actual historic gas quality at the appropriate level of detail Burner-tip solution is not viable and would limit future access to alternative supplies No broad assumptions can be made about the ability of design certified appliances to operate with a wide variety of gases absent field testing Interchangeability indices can provide flexibility for alternative supplies while facilitating greater predictability in appliance response to variations in gas supply

15. Thank you ©2003 WGL Holdings, Inc. For questions or copies, please contact Jennifer Baber Deegan at jdeegan@washgas.com, or 703.750.5146