Exhibit 10.1.af

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Annual Team Performance Incentive (ATPI) Plan

2002

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Table of Contents

 

Page No.

Glossary of terms

2

  

What is the ATPI Plan?

3

  

What is the performance measurement period?

3

  

Who is eligible to participate

3

  

Who is ineligible to participate

4

  

How does the ATPI Plan work?

4

  

What are the Performance Measures?

•

Corporate Performance (EPS) Goals

•

Business Unit Performance Goals

•

IPOs

4

  

How is my ATPI award calculated?

•

Base Pay

•

Target Award

•

Award Weighting Factors

•

Performance Score

7

  

ATPI examples

9

  

What is the timing for payment of ATPI awards?

13

  

What about new hires during the measurement period?

13

  

What about a change in status during the measurement period?

13

  

What is the effect of the ATPI award on other benefits

14

  

Can the company amend or terminate the ATPI Plan?

14

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Glossary of Terms

ATPI Plan

Annual Team Performance Incentive Plan

Award weighting factors

The weight assigned to each of the Performance Measures.  The weight of all your
Performance Measures equals 100%.

Business units

The three designated business units for purposes of the ATPI Plan are:
distribution operations, AGL Networks, and AGL Services Company.

Capital

Capital includes all budgeted capital expenditures and, as applicable,
Manufactured Gas Plant (MGP) expenditures for each business unit.

EBIT

A designated business unit earnings before interest and taxes equals EBIT.

EPS

Earnings per share

IPOs

Individual Performance Objectives

Operating margin less direct operating and maintenance expense

Revenue minus cost of goods sold equals operating margin.  Direct operating and
maintenance expenses exclude allocated costs, depreciation and taxes other than
income taxes and include capitalized administrative and general cost.

Performance measurement period

The performance measurement period for the current ATPI Plan is October 1, 2001
through December 31, 2002.

Performance Measures

Performance Measures are the criteria used to determine ATPI awards.
 Performance Measures include corporate performance (EPS) goals for the company,
business unit financial performance goals and, for certain employees, IPOs.

Performance score

Represents the level of corporate, business unit and IPO performance attained at
the end of the performance measurement period.  The performance score is
expressed as a percentage ranging from 0% to 150%.

Target award

The potential amount of compensation that you have the opportunity to earn as
incentive compensation if the total performance score for the Performance
Measures is 100%.  A target award is expressed as a percentage of base pay.

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Q.

What is the ATPI Plan?

A.

You are eligible to participate in the Annual Team Performance Incentive (ATPI)
Plan, an important component of AGL Resources' Total Rewards philosophy.  The
ATPI Plan pays cash awards to eligible employees if established Performance
Measures are met or exceeded during the performance measurement period.
 Performance Measures include the company's financial performance goals and
business unit goals and, for certain employees, individual performance
objectives.  

The ATPI Plan is designed to reward employees for:

•

Adding sustainable shareholder value;

•

Increasing and improving company and business unit operating efficiencies; and

•

Improving customer service.

Awards under this plan must be earned and should not be viewed as an entitlement
or guarantee of employment. The company must meet its corporate financial
performance goal in order for any payment to be made, irrespective of the level
of business unit achievement or individual performance achievement.

Q.

What is the performance measurement period?

A.

The performance measurement period for the current ATPI Plan is October 1, 2001
through December 31, 2002.

Q.

Who is eligible to participate?

A.

You are eligible to participate if you satisfy each of the following conditions:

•

Full-time employee of AGL Resources Inc. (AGLR) or one of the following
subsidiaries:

•

Atlanta Gas Light Company (AGLC);

•

AGL Networks, LLC (AGLN);

•

AGL Services Company (AGSC);

•

Chattanooga Gas Company (CGC); or

•

Virginia Natural Gas, Inc. (VNG)

•

Employed on or before September 30, 2002;

•

Active status as an employee or on an approved paid leave of absence when ATPI
award checks are distributed; and

•

Signed IPOs if you are at position grade E4 or above.

Note: If you are a VNG bargaining unit employee, you are eligible to participate
in the ATPI Plan effective May 6, 2002.  Your award under the ATPI Plan, if any,
will be prorated based on the number of months in the ATPI Plan measurement
period that you were eligible to participate.  

Q.

Who is ineligible to participate?

A.

Seasonal, part-time, co-op, interns, and contract employees are not eligible to
participate.  Sequent Energy Management employees are not eligible to
participate.  In addition, employees who are hired after September 30, 2002, and
those who retire, resign or are discharged on or before the date any awards are
paid are not eligible for payment of an award (see page 13).

Q.

How does the ATPI Plan work?

A.

At the beginning of the measurement period, Performance Measures are
established.  For the company and each of the business units, Performance
Measures consist of financial performance goals.  For individuals at position
grade E4 and above, Performance Measures also include IPOs.  

Q.

What are the Performance Measures?

A.

Corporate Performance (EPS) Goal

Corporate performance is measured against an earnings per share (EPS) goal
approved by the Board of Directors for the 2002 performance measurement period
(October 1, 2001 through December 31, 2002).  The EPS goal, which differs from
management's publicly stated EPS expectations for future periods, is an
aggressive earnings goal, set at a level that is intended to provide an
incentive for employees to devote extraordinary efforts to improve the company's
performance and, in fact, to exceed both management's EPS estimates and the top
end of the range of analysts' EPS expectations.  You should therefore expect EPS
goals for the ATPI Plan to exceed management's EPS expectations that are set
forth from time to time in the company's publicly available earnings guidance.
 At the end of the measurement period (December 31, 2002), the corporate ATPI
payout (the company performance score) is expressed as a percentage and can
range from 0% to 150%.

The following chart shows the approved EPS goals for the ATPI Plan and
corresponding ATPI payouts during the 2002 performance measurement period
(October 1, 2002 through December 31, 2002).

EPS Goal

Company ATPI Payout

$2.19

50%

$2.23

100%

$2.26

125%

$2.28

150%

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The company must meet its minimum EPS goal for the ATPI Plan before any payments
under the ATPI Plan will be made.  In addition, in measuring the company's
performance, the Board of Directors and the CEO have the discretion to remove
the effects of all or a portion of one-time items from reported EPS.

Business Unit Performance Goals

We currently have three designated business units for purposes of the ATPI Plan:
 

•

Distribution Operations

o

If you are an employee of AGLC, CGC, or VNG, or part of an AGSC support function
that reports to the EVP of Distribution and Pipeline Operations, then you are
part of our Distribution Operations business unit.

•

AGL Networks  (AGLN)

o

If you are an employee of AGLN, then you are part of our AGLN business unit.  

o

•

AGL Services Company (AGSC)

o

If you are an AGSC employee in the CEO organization, CFO organization, General
Counsel organization, or Governmental Relations, then you are part of our AGSC
business unit.

Business unit performance is measured by selected financial criteria that adds
value to the company's financial and operational performance.   Like the company
EPS goal, business unit goals are aggressive goals set at levels that are
intended to provide an incentive for employees to devote extraordinary efforts
to improve their business unit's performance.  For the 2002 performance
measurement period (October 1, 2001 through December 31, 2002), business unit
performance is measured by the one of the following criteria:

•

A combination of the business unit's operating margin less direct operating and
maintenance expenses and capital expenditures and capital expenditures
(including MGP); or

•

The business unit's earnings before income taxes.

At the end of the performance measurement period (December 31, 2002), each
business unit's performance score is calculated and is expressed as a percentage
that can range from 0% to 150%.

The following chart presents information about each business unit's goal and
corresponding ATPI payouts for the 2002 measurement period (October 1, 2001
through December 31, 2002).

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Distribution Operations

($ in millions)

 

Weighting

50%

payout

100% payout

125% payout

150% payout

EBIT

70%

$269.3

$278.1

$280.9

$283.7

Capital expenditures, including MGP

30%

240.6

$231.4

$224.4

$222.1

AGL Networks

($ in millions)

 

Weighting

50%

payout

100% payout

125% payout

150% payout

EBIT

70%

($1,332)

($532)

($132)

$473

Capital expenditures

30%

$26.1

$25.1

$24.4

$24.1

AGL Services Company

($ in millions)

 

Weighting

50%

payout

100% payout

125% payout

150% payout

Operating Margin less direct operating and maintenance expense

70%

($146.0)

($138.6)

($135.8)

$(135.0)

Capital expenditures

30%

$13.2

$12.7

$12.3

$12.2

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Individual Performance Objectives (IPOs)

For participants at grade level E4 and above, IPOs measure individual
performance, and a portion of your incentive compensation is based on the extent
to which you achieve your IPOs.  IPOs measure how your individual performance
contributes to or adds value to the company's financial and operational
performance.  The purpose of IPOs is to document the employee's expected
performance outcomes over the performance measurement period.  Your IPO score is
expressed as a percentage and can range from 0% to 150%.  

The following chart presents information about IPO assessment and corresponding
ATPI payout during the 2002 measurement period (October 1, 2001 through December
31, 2002).

Unsatisfactory

Needs Improvement

Fully Satisfactory

Exceeds Expectations

Performance Leader

0%

50%

100%

125%

150%

Q.

How is my ATPI award calculated?

The four components on which ATPI is calculated are:

Base Pay

The base pay component is your annualized base pay, excluding overtime,
effective on December 31, 2002.  However, if you have entered into an agreement
with the company during the measurement period that specifies another
arrangement, the terms of your agreement with the company govern the terms of
your ATPI award.

Target Award

Your target award is expressed as a percentage of your base pay and represents
the potential amount that you have the opportunity to earn as incentive
compensation if the total performance score for the Performance Measures is
100%.  The actual award that you receive, if any, may be greater or lesser than
the target award depending on the level of company, business unit, or individual
performance.

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The following table shows position grades and corresponding target awards.

AGL Salary Grade at 12/31/02

AGLN Bonus Grade at 12/31/02

Target Incentive Pay (% of Annualized Base Pay)

Nonexempt (includes bargaining unit employees

N/A

4%

E1-E5

Z

6%

E6

Y

10%

E7

X

12%

E8

W

17%

E9

V

20%

E10 and above

U

Individually determined

Award Weighting Factors

The three Performance Measures (corporate performance, business unit performance
and individual performance) are weighted so that some Performance Measures will
affect your overall performance score more than others.  Weighting factors are
expressed as percentages, with the weighting factors of all of your Performance
Measures totaling 100%.

The following table shows position grades and the corresponding weight of
corporate performance, business unit performance and IPO achievement.  

AGL Salary

Grade

at 12/31/02

AGLN Bonus Grade

at 12/31/02

Corporate Component

Business Unit Component

IPO Component

Nonexempt and E1 - E3

Z

50%

50%

0%

E4 and above

U - Y

25%

25%

50%

Performance Score

At the end of the performance measurement period, a performance score is
determined for each Performance Measure (corporate, business unit and IPO).  The
performance scores are expressed as a percentage ranging from 0% to 150%.  IPO
scores will be rounded upward to the next highest whole percentage.  If the
corporate or business unit performance score is between the points shown on the
EPS and business unit performance charts shown on pages 5 through 6, then the
respective payout will be interpolated on a straight-line basis between those
two points, and rounded upward to the next highest whole percentage.    

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* Notwithstanding the above, if you receive a performance rating of "needs
improvement" or "unsatisfactory" on your annual performance review, your total
ATPI award, if any, will be reduced by 50%.

ATPI examples

At the end of the measurement period (December 31, 2002), the ATPI award is
calculated based on base pay, target award, weight of award, and performance
scores.

Because of this year's 15-month measurement period, the ATPI award will be
adjusted to include 15 months of base pay.  

In the examples on the following pages, an ATPI award is calculated using
different sets of assumptions.  

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Example "A"

If …

•

You are an employee of AGLC; and

•

your position grade is E4 on December 31, 2002; and

•

your annualized base pay on December 31, 2002 is $50,000; and

•

your target award is 6%; and

•

the company's EPS is $2.23, which means the company performance score is 100%;
and

•

the business unit's target is met, which means the business unit score is 100%;
and

•

your IPO score is "exceeds expectations," which means your IPO score is 125%,

Step 1 - Calculation of 15 Months Base Pay

Your base pay upon which each component of the award will be based is calculated
as follows:

Base pay on December 31, 2002, divided by 12 months of pay, multiplied by 15
months for the ATPI measurement period.  Calculated for this example as follows:

$50,000 / 12 x 15 = $62,500

Step 2 - Calculation of Total ATPI Award

 

Current Base Pay - calculated for 15 months

 

ATPI Target (1)

 

Weight of Company Award (2)

 

Level of Company Performance

 

Result

Company ATPI Portion

$62,500

x

6%

x

25%

X

100%

=

$ 937.50

     

Weight of Business Unit Award

 

Level of Business Unit Performance

  

Business Unit ATPI Portion

$62,500

x

6%

x

25%

x

100%

=

$  937.50

 

 

 

 

 

Weight of Individual Award

 

Level of Individual Performance

 

 

Individual ATPI Portion

$62,500

x

6%

x

50%

x

125%

=

$  2,343.75

     

        

        

TOTAL ATPI AWARD

=

$ 4,218.75

(1)

See page 8 for a discussion of ATPI target awards.

(2)

See page 8 for a discussion of weight of awards.

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Example "B"

If …

•

You are an employee of AGSC; and

•

your position grade is E2 on December 31, 2002; and

•

your annualized base pay on December 31, 2002 is $40,000; and

•

your target award is 6%; and

•

the company's EPS is $2.26, which means the company performance score is 125%;
and

•

the business unit's target is met, which means the business unit score is 100%;
and

•

IPOs are not part of your ATPI calculation,

Step 1 - Calculation of 15 Months Base Pay

Your base pay upon which each component of the award will be based is calculated
as follows:

Base pay on December 31, 2002, divided by 12 months of pay, multiplied by 15
months for the ATPI measurement period.  Calculated for this example as follows:

$40,000 / 12 x 15 = $50,000

Step 2 - Calculation of Total ATPI Award

 

Current Base Pay - calculated for 15 months

 

ATPI Target (1)

 

Weight of Company Award (2)

 

Level of Company Performance

 

Result

Company ATPI Portion

$50,000

x

6%

x

50%

x

125%

=

$1,875.00

     

Weight of Business Unit Award

 

Level of Business Unit Performance

  

Business Unit ATPI Portion

$50,000

x

6%

x

50%

x

100%

=

$1,500.00

 

 

 

 

 

Weight of Individual Award

 

Level of Individual Performance

 

 

Individual ATPI Portion

N/A

x

N/A

x

N/A

x

N/A

=

N/A

              

TOTAL ATPI AWARD

=

$3,375.00

(1)

See page 8 for a discussion of ATPI target awards.

(2)

See page 8 for a discussion of weight of awards.

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Example "C"

•

If …You are an employee of AGSC; and

•

your position grade is E7 on December 31, 2002;

•

your annualized base pay on December 31, 2002 is $80,000; and

•

your target award is 12%; and

•

the company's EPS is $2.26, which means the company performance score is 125%;
and

•

the business unit's performance score is 100%; and

•

your IPO score is 100%; and

•

your performance appraisal score is "needs development,"

Step 1 - Calculation of 15 Months Base Pay

Your base pay upon which each component of the award will be based is calculated
as follows:

Base pay on December 31, 2002, divided by 12 months of pay, multiplied by 15
months for the ATPI measurement period.  Calculated for this example as follows:

$80,000 / 12 x 15 = $100,000

Step 2 - Calculation of Total ATPI Award

 

Current Base Pay - calculated for 15 months

 

ATPI Target (1)

 

Weight of Company Award (2)

 

Level of Company Performance

 

 

Result

Company ATPI Portion

$100,000

x

12%

x

25%

x

125%

=

$ 3,750.00

     

Weight of Business Unit Award

 

Level of Business Unit Performance

  

Business Unit ATPI Portion

$100,000

x

12%

x

25%

x

100%

=

$3,000.00

 

 

 

 

 

Weight of Individual Award

 

Level of Individual Performance

 

 

Individual ATPI Portion

$100,000

x

12%

x

50%

x

100%

=

$  6,000.00

     

       

        

TOTAL ATPI AWARD

=

$ 12,750.00

     

50% of ATPI PAYOUT (3)

 

    $   6,375.00

(1)

See page 8 for a discussion of ATPI target awards.

(2)

See page 8 for a discussion of weight of awards.

(3)   Your total ATPI amount is reduced by 50% because your performance
appraisal rating was "needs improvement" or below.  See page 9.

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Q.

What is the timing for payment of ATPI awards?

The current ATPI Plan measurement period is October 1, 2001 through December 31,
2002.

Payment of awards, if any, will occur as soon as administratively practical in
the first quarter of fiscal 2003.

Q.

What about new hires during the measurement period?

You must be employed by September 30, 2002 to be eligible to participate in the
ATPI Plan.  If you were hired after June 30, 2002, your award, if any, will be
prorated based on the number the months in the ATPI Plan measurement period that
you were an eligible employee.  If you have entered into an agreement with the
company during the measurement period that specifies another arrangement, the
terms of your agreement with the company govern the terms of your ATPI award.

Q.

What about a change in status during the measurement period?

Promotion, Salary Increase or Transfer - For purposes of calculating an ATPI
award, if you had a salary increase, salary grade change or were transferred to
a different business unit during the measurement period, then your award, if
any, will be based on your base salary, salary grade level, and business unit on
December 31, 2002.  Please note that for purposes of calculating the ATPI award,
the PAN reflecting that change must be in place no later than December 11, 2002.
 

Resignation, Retirement, Severance or Discharge - If you resign, retire or are
discharged on or before the date when any awards are paid (i.e., the date that
checks are distributed), you will not be eligible for payment of an award, even
if your severance, if any, extends past that date.

Leaves of Absence - If you take an approved unpaid leave of absence during the
measurement period, your award will be prorated based on the number of months of
active service during the measurement period. You will be eligible to receive
the prorated portion of the award if you return to active status by March 31,
2003.  If you are on military leave, you will receive payment of the award
according to AGLR's military leave policy.

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Q.

What is the effect of the ATPI award on other benefits?

ATPI awards count as compensation for the Retirement Savings (RSP) Plan and
Nonqualified Savings Plan (NSP).

 

Q.

Can the company amend or terminate the ATPI Plan?

AGLR reserves the right to amend or terminate the ATPI Plan at any time at its
discretion.  

* * *

Provisions of ATPI Plan Applicable to Certain Officers

Certain officers of the company are eligible for an annual incentive award of up
to 200% of their individually determined target award under the ATPI Plan, based
upon accomplishment of performance objectives that are beyond those established
for other plan participants.

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