2011 REGULATORY YEAR IN REVIEW

Based upon legislation championed by AOBA, the District of Columbia approved regulations permitting sub-metering and energy allocation for non-residential rental properties. The rules allow a property owner, property management firm, or other multi-tenant, non-residential property to bill tenants for individually measured electricity and natural gas usage. The regulations became effective on November 11, 2011. The new sub-metering and energy allocations regulations can be found on the AOBA webpage at http://www.aoba-metro.org/ under Utility Update, and on the AOBA Alliance webpage at http://www.aobaalliance.com/ under News and Events.

Consistent with AOBA’s testimony, the Maryland Public Service Commission denied a request by Washington Gas to increase distribution rates by $30 million. Instead, after reducing the Washington Gas request to an $8.4 million rate increase, the Commission further agreed with AOBA and denied (1) an accelerated pipeline replacement surcharge of $115 million, (2) cost recovery for the Company’s Accenture outsourcing contract and (3) a costly credit bill payment arrangement. Finally, the Commission also agreed with AOBA that the current rates for the GMA and C&I non-heating/non-cooling classes should receive no increase.

AOBA challenges $30 million rate increase sought by Washington Gas in Virginia. In testimony, AOBA recommended a reduction of $20 million in the Company’s $30 million rate increase request. To date, AOBA has rejected proposed settlements because they have been inconsistent with its filed testimony; consequently, AOBA is challenging the proposed settlement now pending before the Virginia State Corporation Commission. The Commission has recently granted AOBA’s request for evidentiary hearings in the matter.

AOBA successfully challenged a multi-million dollar revenue guarantee Washington Gas sought in the District of Columbia. The Public Service Commission denied the request by Washington Gas for approval of a Revenue Normalization Adjustment (“RNA”). Had it been approved, the RNA would have guaranteed the revenues of Washington Gas from declines due to energy efficiency, weather, and other factors that could result in lost revenues to the Company by imposing a $0.05 cent per therm increase in monthly natural gas bills. The Commission agreed with AOBA that the Washington Gas request should be denied.

AOBA is actively protecting member interests by strongly contesting Pepco’s $42 million proposal to increase distribution rates in the District of Columbia. AOBA is challenging the proposed rate increase, including the Company’s proposed surcharge for infrastructure replacement.

Other rate cases are on the horizon in 2012. Pepco has reported that the Company will file a request in Maryland, by the end of December 2011, to increase electricity rates in 2012. The DC Public Service Commission has ordered Washington Gas to file a rate case during the first quarter of 2012 because the Commission has stated that Washington Gas is over-earning revenues under its existing rates. AOBA will actively represent members’ interests in these forthcoming rate proceedings.