WHY SHOULD YOUR COMPANY PARTICIPATE? Your company or organization should be an NEU member if you would like to: •Make money in the rapidly-changing energy markets; •Save money on energy costs; •Make more effective energy procurement and management decisions; •Develop a better understanding of best practices to manage your energy costs; •Avoid future energy cost increases; •Be at the forefront of unbiased energy news and issues affecting your business; •Understand best practices on managing your business’ energy costs; •Keep senior management informed of energy issues affecting your business; •Be proactive in your approach to energy rather than reactive to market changes; and •Advocate effectively for energy policies that benefit you.

NEU educates energy users in Northern Illinois on energy topics including: • Energy markets and pricing; • Energy use best practices, current energy news; • Energy cost saving strategies; and • Opportunities to assist in shaping local and national energy policy. NEU holds regular meetings and sponsors periodic seminars on energy topics to keep its members abreast of the latest developments in the energy industry. NEU’s expert staff helps members understand complicated issues such as customer choice, renewable energy programs, distributed energy generation opportunities, rate design changes, and other complicated energy issues. NEU analyzes the status of the market and annually develops a business plan to provide members with important information, anticipating emerging energy issues in the following topic areas: legislative, regulatory, commodity pricing, products, energy efficiency, renewable energy, and utility tariffs. NEU’s annual business plan is a helpful guide to its members’ business cost planning efforts as it highlights expected energy costs in the near and long term as well as potential cost increases or decreases on the horizon. CJT Energy Law distributes the “Energy News Highlights” newsletter weekly to NEU members, providing important news on current topics and current energy pricing information. NEU also releases other important materials periodically via email or at its meetings, summarizing specific regulatory issues, analyzing utility rates, prices, tariff changes, and providing other pertinent information. In addition, the NEU website http://bit.ly/northernilenergy offers participants immediate access to useful and timely information such as breaking news, pricing updates, special reports, meeting notices, and past publications. As necessary, NEU convenes conference calls focusing on urgent market developments, upcoming legislative changes or initiatives, and legal and regulatory issues.

Revenue Neutral to Nicor – NOT to Large Customers

Nicor Rate Design History

• Transportation rates established in 1980’s
• Storage allocated as part of Nicor’s customer choice program
• In 2018 rate case, suppliers questioned Nicor’s “customer care costs”
  • All call center costs paid for by all customers
  • Nicor said bigger issue is the way in which
    choice customers use storage
  • ICC directed Nicor to study the storage issue
• In 2019 rate case, Nicor presented study results
  • Claimed transportation customer misusing
  • ICC directed to present proposal by 6.30.20

How Commercial and Industrial Customers will be impacted:

• New Operational Restrictions
  • Daily Balancing Restrictions
  • Monthly Balancing Restrictions
  • Mandated injections and withdrawals
  • Mandated Storage Capacity – 30 Days
• New Costs
  • System Balancing Charge (SBC)
  • Potential for substantial penalties
• Daily Pricing will become extremely volatile/unpredictable
• May force suppliers to change operations and/or pricing

NICOR Rate Case Schedule

• June 30, 2020 — Nicor Filing Suspended
• November 5, 2020 — Staff / Intervenor Direct Testimony
• December 11, 2020 — Nicor Rebuttal Testimony
• January 14, 2021 — Staff / Intervenor Rebuttal Testimony
• January 29, 2021 — Nicor Surrebuttal Testimony
• February 9-10, 2021 — Evidentiary Hearings
• March 3, 2021 — Initial Briefs
• March 12, 2021 — Reply Briefs
• March 17, 2021 — Draft Orders / Position Statements
• April 7, 2021 — Administrative Law Judges’ Proposed Order
• April 21, 2021 — Briefs on Exceptions
• April 28, 2021 — Reply Briefs on Exceptions
• May 21, 2021 — Tariff changes to be approved by ICC
• May 1, 2022 — Tariff changes to go in effect

WHAT CAN BE DONE?

• Get informed about these changes
• Get involved and advocate!
• Get prepared for a different market reality

Sherwood Direct Ex. 1.0, page 21

All transportation customers will pay a new System Balancing Charge (“SBC”), a gas cost recovery charge that allocates a portion of pipeline storage and transportation costs.

Language in Rider 15 – Customer Select (Applicable to Rates 1, 4, and 5)

Charges.

The rates for service hereunder shall be those of the Customer’s companion rate, excluding Factor GC of Rider 6, Gas Supply Cost. In place of Factor GC, the Customer shall be charged a Balancing and Storage Adjustment which shall be the sum of the following: (1) Transportation Service Adjustment (TSA); (2) Storage Service Cost Recovery (SSCR); and (3) Customer Select Balancing Charge (CSBC) multiplied by the Customer’s total use in the billing period, each such component as determined in Rider 6, Gas Supply Cost. The CBSC will be replaced with the Storage Balancing Charge (SBC) per Rider 6 as of May 1, 2022. Additionally, the Customer shall receive a Transportation Service Credit (TSC) consisting of the sum of: (1) a 0.04 cent per therm storage withdrawal adjustment credit, and (2) a 0.26 cent per therm credit for gas in storage, multiplied by the Customer’s total use in the billing period. In the event that the Customer’s Supplier does not provide the Company the required firm supply affidavit by November 1 of each year, as required under Rider 16 – Supplier Aggregation Service, the Company shall charge the Customer the Company’s Non Commodity Gas Cost (NCGC), as filed from time to time as part of Rider 6, Gas Supply Cost, in place of the CSBC, from November 1 through March 31.

In Rider 6, Gas Supply Cost, Exhibit 2.2, Page 31

SBC System Balancing Charge – Primarily a non-commodity related, per therm, gas cost recovery mechanism applied to all deliveries or estimated deliveries of gas to the Customer’s facilities under the provisions of Rate 74, Rate 75, Rate 76, Rate 77 and Rider 15, Customer Select. This charge is the usage level based counterpart to the NCGC, and excludes firm transportation costs for which the Supplier is directly responsible. Revenues arising through the application of this charge will be credited to the NCGC. This charge replaces the CSBC as of May 1, 2022.

Features

☐ NEU consulting network brings 100 plus years of Illinois Natural Gas, Electric, and Legal experience.

☐  Experience includes tariff and rate making expertise, first-hand operational experience with utilities and competitive retail and wholesale supply base, and vast legal experience within the Illinois legislative process.

☐ Regular Meeting Schedule, at least 4 per year.

☐ Guest Speakers provide outside expert opinions and testimony

☐ Peak Demand Alerts for Natural Gas and Electricity

☐ Natural Gas Pricing Updates

☐ Electricity Pricing Updates

☐ Fundamental Market Analysis and Outlook

☐ Professional networking, idea sharing and collaboration opportunities

Benefits

☐ Knowledge + Volume = Savings

☐ Stay ahead of the curve!  Receive valuable information that will help your organization proactively manage energy expenses.

☐ Receive market intelligence that can easily be shared with your organization’s senior leadership team and can assist them with the decision-making process.

☐ Receive access via email and phone to the NEU consulting network.  Opportunities to discuss relevant market events with experts in practical terms.

☐ Learn about projects and strategies that can reduce your organization’s energy spend.

☐ The ability to influence regulatory proceedings and the legislative process.

☐ Develop a large voice and leverage!  When opportunities arise, the NEU has been the launching pad for coalitions that have saved large commercial and industrial consumers millions of dollars on their energy bills.

The energy complex is sharply higher (prices rising) trading well above Friday’s close as continued developments in Libya and the shut-in of roughly 100,000 bpd there continues to force fresh length into the market while flushing recent shorts as Brent hits a fresh 2 ½ year high above $108/bbl.  Unrest in the Mideast is approaching a one month anniversary now and while the IEA says OPEC can offset any production shortfalls that may emerge, it’s important to note that several of the key OPEC players are the very country’s that are at risk of political upheaval (Iran, Saudi Arabia, Libya, Algeria, etc…).  This isn’t over by a long shot.

The macros remain in support with a sharply weaker dollar (-905 basis points) and notably higher equities on the day.  European debt concerns have eased with good bond auctions this week, prompting a sharp rally in the euro.  Overall the energy complex continues to have an upward bias this week, no doubt in reaction to the pipeline closure, higher equities, and sharply weaker dollar which is down another 700 basis points this morning.

Overall the crude market remains extremely bullish as speculative money continues to fly into the nearby contract, flattening the curve which indicates increasing interest in oil today vs. the out-months (from the pipeline issues).  HO continues to lead the market however with the nearby breaching $2.62 this morning having risen over a dime in just the last two sessions alone.  Today we remain overbought and at risk of a substantial downside move, but now into our 4^th higher day with gains of better than a $1 in crude each session……….we’re not expecting that weakness to materialize anytime soon with all the aforementioned issues affecting the market.

Shouldn’t these investments have to stand on their own, without subsidies to compete in the marketplace?

http://online.wsj.com/article/SB10001424052702304772804575558400606672006.html

Bullish: Crude will move up due to quantitative easing (QE 2), which will depress the U.S. dollar and thereby increase the cost of commodities like oil.

Bearish: Inventory is comfortable, supply is ample relative to weak demand due to a weak economy.  Interesting though, is that one of the bearish cases for oil (shift away from heating oil to more natural gas), is a bullish pull for natural gas, as more natural gas is expected to replace petroleum based energy.

Here is a link to an article that expands on the bull and bear case for crude oil.

http://www.insidefutures.com/article/179618/Crude%20Oil:%20the%20Case%20for%20the%20Bulls,%20and%20the%20Bears.html

There has been a lot of talk in the news of Quantitative Easing (QE), which is is the unofficial description of the act of essentially printing money.  The Fed goes into the market place with “created money” and buys things like assets, treasuries, and say mortgages…….essentially acting as another buyer (think big investor) but usually the buyer of last resort.  They pay for that stuff with printed money or “hold it on their balance sheet” as a liability to be sold out again later.  They essential create demand where there isn’t in theory with money that isn’t there.  If what the Fed had on its balance sheet could never be sold back (currently roughly $2 Trillion), they would effectively have monetized it or “printed the money”.  They technically haven’t yet, but that’s only because there’s a belief they could one day sell these assets back to the open market or let their Treasuries mature and not buy more………it’s called sterilizing.  If they don’t sterilize they are directly monetizing debt which is highly inflationary…..more dollars in circulation chasing the same number of goods.  Ultimately it will take more dollars to own things and you have supply-side driven inflation.

We think it’s a mistake to do more QE and that our woes lie in the government policy sector, not the monetary policy sector.  We are at zero and deleveraging needs to happen.  I think inflation will do more harm than good because it won’t inflate growth and incomes (wages) just costs for things like oil and all our imports, further deteriorating buying power, reducing disposable income, and tightening consumer and business balance sheets even more.  We are a consumer nation………inflation is a net negative to us in our opinion.

Sentiment continues to improve with the better data out of China and less-bad data domestically from jobless claims to the trade balance.  NG continues to slowly rise, jumping above the $4 level in early trading this morning from the $4.62 low seen at the end of August.  Congesting now for a couple weeks near the lows from this spring, the market looks ready to move higher as it moves above the 18-day MA in its first 3-day rally since……well, the end of July (that’s how oversold we’ve become).  We are beginning to see more coal-to-gas switching which you would expect below $4/Dth, and that is likely to keep these values flat to higher heading into winter from here.  The first week of September marked the low last year, and we’ve probably already seen the low heading into the winter for this year…..we’ll see?  Overall I expect a weaker dollar and/or higher trade in equities today to continue to keep energies well supported heading into the DOE report tomorrow.