Agreement on New National Fuel Rate Plan Signed; Public Service Commission Vote Expected This Summer

Business Wire, April 15, 2005

WILLIAMSVILLE, N.Y. -- The parties in the National Fuel Gas Distribution Corporation (the "Company") rate case have agreed on a comprehensive two-year rate plan proposal, which is expected to be considered by the New York State Public Service Commission (PSC) at its July 20, 2005, meeting. If the PSC approves the rate plan, the utility will be allowed to raise its base revenues by $21 million, or 2.8 percent overall, for two years effective August 1, 2005. However, with the application of bill credits and tax revenue reductions, overall, customers would actually realize a $15 million (or 2 percent) decrease in their annual gas bill. For the typical residential customer, the decrease would amount to about 1.5 percent, or about $20 per year.

"This agreement provides the revenues the utility needs to assure our customers safe and reliable natural gas service, while still producing savings for customers. We are pleased that all of the parties involved were able to develop this mutually beneficial agreement," said National Fuel Gas Distribution Corporation President Dennis J. Seeley.

The base revenue increase of $21 million would be achieved through the elimination of a current bill credit ($4.5 million), the elimination of the now-defunct Home Insulation and Energy Conservation Act (HIECA) credit ($1.3 million), and a base rate increase that accounts for the balance ($15.2 million).

The increase would represent the utility's first hike in delivery service charges since 1998. In that time, the cost of delivery services has gone down 13 percent (from $67.84 for the typical customer to $59.10 in January 2005). However, gas supply charges, the actual cost of the natural gas commodity that the Company buys on the open market, have risen dramatically in that same period, from $91.76 in 1998 to $178.90 in 2005, an increase of 95 percent. Supply charges, by law, cannot be marked up or discounted.

Offsetting the base rate increase is the anticipated refund to customers of $32.5 million in previously collected charges to recover the State Income Taxes obligations of the Company. The anticipated $32.5 million refund would be distributed to customers through two annual $16.25 million credits (for 12-month-periods beginning August 1, 2005, and August 1, 2006). Beginning in 2000, on the approval of the State Legislature and the PSC, utilities in New York State began transitioning from the state's Gross Receipts Tax model to the State Income Tax mechanism.

The rate plan recognizes that external cost pressures had caught up to the utility's ability to cut operational costs through internal measures, such as the consolidation of offices, utilization of new technologies, and reduction's workforce through attrition. Since 1990, the Company's employment levels have dropped by 45 percent. The rate plan also provides for programs designed to lend additional support to low-income customers and to maintain the Company's high level of safety and customer service.

Other provisions of the comprehensive rate plan include:

--Supplemental performance mechanisms, which, added to those already in place, ensure the Company maintains its high level of service and safety to all of its 500,000 customers in New York.

--A modification of the Low Income Residential Assistance (LIRA) program, which would result in an increase in the size of the discount available to the 28,000 low-income customers currently being served, from $100 to a maximum level of $170. The parties have also agreed to further enhance the LIRA program in year two of the settlement agreement.

--Continued collaboration among the parties on programs designed to promote the PSC's "Customer Choice" initiative, which allows customers to choose an approved natural gas supplier other than the utility.

--Agreement by the Company not to request another base rate increase prior to August 25, 2006.

Final approval of the rate plan is pending. The PSC is expected to vote on the measure at its meeting on July 20, 2005, in Albany, N.Y.

National Fuel Gas Distribution Corporation comprises the utility segment of National Fuel Gas Company (NYSE: NFG), a diversified energy holding company that is engaged in a number of natural gas related activities. The utility provides natural gas service to approximately 500,000 customers in western New York and 230,000 customers in northwestern Pennsylvania. Additional information about National Fuel and its customer services is available at http://www.nationalfuelgas.com or by calling 1 (800) 365-3234.

Average Costs for Residential Customers in Western New York

                  Gas Supply        Delivery Service        Total
                    Charges             Charges
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 January 1995       $75.65             $61.87             $137.52
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 January 1996      $108.11             $65.16             $173.27
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 January 1997      $137.11             $67.20             $204.31
----------------------------------------------------------------------
 January 1998       $91.76             $67.84             $159.60
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 January 1999       $86.50             $62.87             $149.37
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 January 2000       $93.89             $62.61             $156.50
----------------------------------------------------------------------
 January 2001      $266.46             $55.27             $321.73
----------------------------------------------------------------------
 January 2002       $95.61             $58.50             $154.11
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 January 2003      $135.62             $59.79             $195.41
----------------------------------------------------------------------
 January 2004      $169.20             $59.10             $228.30
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 January 2005      $178.90             $59.10             $238.00
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              Note: Costs are based on consumption during
   normal weather conditions and do not reflect budget plan billing