Patriots Energy Group (“PEG”) a public body, corporate and politic, formed by three natural gas authorities located in the north central region of South Carolina: Chester County Natural Gas Authority (“CCNGA”), Lancaster County Natural Gas Authority (“LCNGA”), and York County Natural Gas Authority (“YCNGA”) (the “Members”) pursuant to the Joint Agency Act of the South Carolina legislature. The General Assembly of South Carolina created each of the Members in 1954 to provide retail natural gas service through their transmission and distribution facilities in their respective service territories. The Members are political subdivisions of the state of South Carolina and are considered “special purpose” districts that operate autonomously within their respective service territories.

The Members’ purpose in forming PEG was to achieve lower costs of operation through synergies that have evolved with partial deregulation of the natural gas industry. For example, the Members have diversified their sources of supplies through a portfolio of supply arrangements rather than depending on the services of a single seller. The Members have pooled their transportation resources and lower the delivered cost of supplies. Through joint action, these Special Purpose Districts use economies of scale to reduce the overall cost of natural gas to their ultimate customers.

Prior to April 1, 2003, the Members, as resale distributors of natural gas, satisfied all of their needs through the purchase of natural gas on a bundled basis from an intrastate pipeline subject to the jurisdiction of the Public Service Commission of the State of South Carolina. In April 2003, South Carolina’s governor signed into law the Joint Agency Act, which amended state law to permit the Members to form PEG as a separate legal entity for purposes related to the operation of their gas systems. Subsequently, the intrastate pipeline reformed as an interstate pipeline regulated by the Federal Energy Regulatory Commission.

Today PEG acquires natural gas supplies for the full requirements of the Members and manages their transportation and storage capacity on three interstate pipelines: Transcontinental Gas Pipeline, Southern Natural Gas Pipe Line, and Carolina Gas Transmission. PEG has entered into three long-term natural gas supply contracts with the Public Energy Authority of Kentucky, the Tennessee Energy Acquisition Authority, and Main Street Natural Gas. Each of these entities have executed prepaid contracts to deliver to PEG gas supplies at below market prices.